##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From _________ To _________
 Commission File Number: 000-30421
 HANMI FINANCIAL CORPORATION
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    95-4788120(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)3660 Wilshire Boulevard, Penthouse Suite ALos Angeles, California
    
    90010(Address of Principal Executive Offices)
    
    (Zip Code)
 (213) 382-2200  (Registrants Telephone Number, Including Area Code)
 Not Applicable  (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
  þ o
  o o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o(Do Not Check if a Smaller Reporting Company)
  o þ




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##### 



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  QUARTERLY REPORT ON FORM 10-Q  THREE MONTHS ENDED MARCH 31, 2011
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSConsolidated Balance Sheets (Unaudited)
    
    
    1Consolidated Statements of Operations (Unaudited)
    
    
    2Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income (Loss)
(Unaudited)
    
    
    3Consolidated Statements of Cash Flows (Unaudited)
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    33ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    58ITEM 4. CONTROLS AND PROCEDURES
    
    
    58PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    59ITEM 1A. RISK FACTORS
    
    
    59ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    59ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    59ITEM 4. REMOVED AND RESERVED
    
    
    59ITEM 5. OTHER INFORMATION
    
    
    59ITEM 6. EXHIBITS
    
    
    60SIGNATURES
    
    
    61EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (Dollars in Thousands, Except Share Data)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCash and Due From Banks
    
    $
    67,507
    
    
    $
    60,983Interest-Bearing Deposits in Other Banks
    
    
    83,354
    
    
    
    158,737Federal Funds Sold
    
    
    19,500
    
    
    
    30,000Cash and Cash Equivalents
    
    
    170,361
    
    
    
    249,720Securities Held to Maturity, at Amortized Cost (Fair Value of $840 as of March 31, 2011
and
$847 as of December 31, 2010)
    
    
    838
    
    
    
    845Investment Securities Available for Sale, at Fair Value (Amortized Cost of $540,685 as of
March 31, 2011 and $415,491 as of December 31, 2010)
    
    
    538,356
    
    
    
    413,118Loans Receivable, Net of Allowance for Loan Losses of $125,780 as of March 31, 2011 and
$146,059 as of December 31, 2010
    
    
    1,999,986
    
    
    
    2,084,447Loans Held for Sale, at the Lower of Cost or Fair Value
    
    
    47,649
    
    
    
    36,620Accrued Interest Receivable
    
    
    8,796
    
    
    
    8,048Premises and Equipment, Net
    
    
    17,165
    
    
    
    17,599Other Real Estate Owned, Net
    
    
    2,642
    
    
    
    4,089Customers Liability on Acceptances
    
    
    805
    
    
    
    711Servicing Assets
    
    
    2,698
    
    
    
    2,890Other Intangible Assets, Net
    
    
    2,015
    
    
    
    2,233Federal Home Loan Bank Stock, at Cost
    
    
    26,200
    
    
    
    27,282Federal Reserve Bank Stock, at Cost
    
    
    7,449
    
    
    
    7,449Income Taxes Receivable
    
    
    9,188
    
    
    
    9,188Bank-Owned Life Insurance
    
    
    27,581
    
    
    
    27,350Other Assets
    
    
    17,937
    
    
    
    15,559TOTAL ASSETS
    
    $
    2,879,666
    
    
    $
    2,907,148LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:Deposits:Noninterest-Bearing
    
    $
    576,733
    
    
    $
    546,815Interest-Bearing
    
    
    1,854,207
    
    
    
    1,919,906Total Deposits
    
    
    2,430,940
    
    
    
    2,466,721Accrued Interest Payable
    
    
    14,184
    
    
    
    15,966Banks Liability on Acceptances
    
    
    805
    
    
    
    711Federal Home Loan Bank Advances
    
    
    153,565
    
    
    
    153,650Other Borrowings
    
    
    1,386
    
    
    
    1,570Junior Subordinated Debentures
    
    
    82,406
    
    
    
    82,406Other Liabilities
    
    
    12,329
    
    
    
    12,868Total Liabilities
    
    
    2,695,615
    
    
    
    2,733,892COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common Stock, $0.001 Par Value; Authorized 500,000,000 Shares; Issued 155,890,890
Shares (151,258,390 Shares Outstanding) and 155,830,890 Shares (151,198,390 Shares
Outstanding) as of March 31, 2011 and December 31, 2010, Respectively
    
    
    156
    
    
    
    156Additional Paid-In Capital
    
    
    472,676
    
    
    
    472,335Unearned Compensation
    
    
    (246
    )
    
    
    (219
    )Accumulated Other Comprehensive Income  Unrealized Gain on Securities Available
for Sale and Interest-Only Strips, Net of Income Taxes of $602 as of March 31, 2011
and
December 31, 2010
    
    
    (2,920
    )
    
    
    (2,964
    )Accumulated Deficit
    
    
    (215,603
    )
    
    
    (226,040
    )Less Treasury Stock, at Cost: 4,632,500 Shares as of March 31, 2011 and December 31,
2010
    
    
    (70,012
    )
    
    
    (70,012
    )Total Stockholders Equity
    
    
    184,051
    
    
    
    173,256TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,879,666
    
    
    $
    2,907,148
  1




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (Dollars in Thousands, Except Per Share Data)
 Three Months EndedMarch 31,2011
    
    
    2010INTEREST AND DIVIDEND INCOME:Interest and Fees on Loans
    
    $
    30,905
    
    
    $
    36,695Taxable Interest on Investment Securities
    
    
    2,673
    
    
    
    1,070Dividends on Federal Reserve Bank Stock
    
    
    112
    
    
    
    118Interest on Interest-Bearing Deposits in Other Banks
    
    
    89
    
    
    
    55Tax-Exempt Interest on Investment Securities
    
    
    40
    
    
    
    77Interest on Term Federal Funds Sold
    
    
    27
    
    
    
    Dividends on Federal Home Loan Bank Stock
    
    
    21
    
    
    
    21Interest on Federal Funds Sold and Securities Purchased Under Resale Agreements
    
    
    8
    
    
    
    17Total Interest and Dividend Income
    
    
    33,875
    
    
    
    38,053INTEREST EXPENSE:Interest on Deposits
    
    
    6,735
    
    
    
    9,704Interest on Federal Home Loan Bank Advances
    
    
    333
    
    
    
    346Interest on Junior Subordinated Debentures
    
    
    698
    
    
    
    669Total Interest Expense
    
    
    7,766
    
    
    
    10,719NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES
    
    
    26,109
    
    
    
    27,334Provision for Credit Losses
    
    
    
    
    
    
    57,996NET INTEREST INCOME (LOSS) AFTER PROVISION FOR CREDIT LOSSES
    
    
    26,109
    
    
    
    (30,662
    )NON-INTEREST INCOME:Service Charges on Deposit Accounts
    
    
    3,141
    
    
    
    3,726Insurance Commissions
    
    
    1,260
    
    
    
    1,278Remittance Fees
    
    
    462
    
    
    
    462Trade Finance Fees
    
    
    297
    
    
    
    351Other Service Charges and Fees
    
    
    333
    
    
    
    412Bank-Owned Life Insurance Income
    
    
    230
    
    
    
    231Net Gain on Sales of Investment Securities
    
    
    
    
    
    
    105Net Loss on Sales of Loans
    
    
    (338
    )
    
    
    Other Operating Income
    
    
    123
    
    
    
    440Total Non-Interest Income
    
    
    5,508
    
    
    
    7,005NON-INTEREST EXPENSE:Salaries and Employee Benefits
    
    
    9,124
    
    
    
    8,786Occupancy and Equipment
    
    
    2,565
    
    
    
    2,725Deposit Insurance premiums and Regulatory Assessments
    
    
    2,070
    
    
    
    2,224Data Processing
    
    
    1,399
    
    
    
    1,499Other Real Estate Owned Expense
    
    
    829
    
    
    
    5,700Professional Fees
    
    
    789
    
    
    
    1,066Directors and Officers Liability Insurance
    
    
    734
    
    
    
    716Supplies and Communications
    
    
    578
    
    
    
    517Advertising and Promotion
    
    
    566
    
    
    
    535Loan-Related Expense
    
    
    225
    
    
    
    307Amortization of Other Intangible Assets
    
    
    218
    
    
    
    328Other Operating Expenses
    
    
    1,964
    
    
    
    1,821Total Non-Interest Expense
    
    
    21,061
    
    
    
    26,224INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES
    
    
    10,556
    
    
    
    (49,881
    )Provision (Benefit) for Income Taxes
    
    
    119
    
    
    
    (395
    )NET INCOME (LOSS)
    
    $
    10,437
    
    
    $
    (49,486
    )EARNINGS (LOSS) PER SHARE:Basic
    
    $
    0.07
    
    
    $
    (0.97
    )Diluted
    
    $
    0.07
    
    
    $
    (0.97
    )WEIGHTED-AVERAGE SHARES OUTSTANDING:Basic
    
    
    151,061,012
    
    
    
    50,998,990Diluted
    
    
    151,287,573
    
    
    
    50,998,990DIVIDENDS DECLARED PER SHARE
    
    $
    
    
    
    $
    
  2




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 (Dollars in Thousands)
 Common
Stock  Number of Shares
    


    Stockholders EquityAccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Treasury
    
    
    TotalTreasury
    
    
    
    
    
    
    Common
    
    
    Paid-in
    
    
    Unearned
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Stock,
    
    
    StockholdersIssued
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Compensation
    
    
    Income
    
    
    Deficit
    
    
    at Cost
    
    
    EquityBALANCE AS OF JANUARY 1, 2010
    
    
    55,814,890
    
    
    
    (4,632,500
    )
    
    
    51,182,390
    
    
    $
    56
    
    
    $
    357,174
    
    
    $
    (302
    )
    
    $
    859
    
    
    $
    (138,031
    )
    
    $
    (70,012
    )
    
    $
    149,744Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    206Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,486
    )
    
    
    
    
    
    
    (49,486
    )Change in
Unrealized Gain on Securities
Available for Sale and Interest-Only Strips,
Net of Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    558
    
    
    
    
    
    
    
    
    
    
    
    558Total Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,928
    )BALANCE AS OF MARCH 31, 2010
    
    
    55,814,890
    
    
    
    (4,632,500
    )
    
    
    51,182,390
    
    
    $
    56
    
    
    $
    357,359
    
    
    $
    (281
    )
    
    $
    1,417
    
    
    $
    (187,517
    )
    
    $
    (70,012
    )
    
    $
    101,022BALANCE AS OF JANUARY 1, 2011
    
    
    155,830,890
    
    
    
    (4,632,500
    )
    
    
    151,198,390
    
    
    $
    156
    
    
    $
    472,335
    
    
    $
    (219
    )
    
    $
    (2,964
    )
    
    $
    (226,040
    )
    
    $
    (70,012
    )
    
    $
    173,256Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    263
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314Restricted Stock Awards
    
    
    60,000
    
    
    
    
    
    
    
    60,000
    
    
    
    
    
    
    
    78
    
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,437
    
    
    
    
    
    
    
    10,437Change in
Unrealized Gain on Securities
Available for Sale and Interest-Only Strips,
Net of Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    44Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,481BALANCE AS OF MARCH 31, 2011
    
    
    155,890,890
    
    
    
    (4,632,500
    )
    
    
    151,258,390
    
    
    $
    156
    
    
    $
    472,676
    
    
    $
    (246
    )
    
    $
    (2,920
    )
    
    $
    (215,603
    )
    
    $
    (70,012
    )
    
    $
    184,051
  3




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (In Thousands)
 Three Months EndedMarch 31,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net Income (Loss)
    
    $
    10,437
    
    
    $
    (49,486
    )Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities:Depreciation and Amortization of Premises and Equipment
    
    
    547
    
    
    
    644Amortization of Premiums and Accretion of Discounts on Investments, Net
    
    
    717
    
    
    
    200Amortization of Other Intangible Assets
    
    
    218
    
    
    
    327Amortization of Servicing Assets
    
    
    192
    
    
    
    252Share-Based Compensation Expense
    
    
    314
    
    
    
    206Provision for Credit Losses
    
    
    
    
    
    
    57,996Net Gain on Sales of Securities Available for Sale
    
    
    
    
    
    
    (105
    )Net Gain on Sales of Loans
    
    
    (1,883
    )
    
    
    Loss on Sales of Other Real Estate Owned
    
    
    219
    
    
    
    95Provision for Valuation Allowance on Other Real Estate Owned
    
    
    441
    
    
    
    5,537Lower of Cost or Fair Value Adjustment for Loans Held for Sale
    
    
    2,221
    
    
    
    Deferred Tax Benefit
    
    
    
    
    
    
    3,208Origination of Loans Held for Sale
    
    
    (1,771
    )
    
    
    (3,369
    )Proceeds from Sales of Loans Held for Sale
    
    
    27,944
    
    
    
    2,959(Increase) Decrease in Accrued Interest Receivable
    
    
    (748
    )
    
    
    466Changes in Fair Value of Stock Warrants
    
    
    14
    
    
    
    Loss on Investment in Affordable Housing Partnership
    
    
    220
    
    
    
    220Increase in Cash Surrender Value of Bank-Owned Life Insurance
    
    
    (231
    )
    
    
    (231
    )Increase in Other Assets
    
    
    (2,598
    )
    
    
    (3,450
    )Increase in Income Taxes Receivable
    
    
    
    
    
    
    (3,126
    )Increase (Decrease) in Accrued Interest Payable
    
    
    (1,782
    )
    
    
    540Increase (Decrease) in Other Liabilities
    
    
    722
    
    
    
    524Net Cash Provided By Operating Activities
    
    
    35,193
    
    
    
    13,407CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from Redemption of Federal Home Loan Bank and Federal Reserve Bank Stock
    
    
    1,082
    
    
    
    Proceeds from Matured or Called Securities Available for Sale
    
    
    19,173
    
    
    
    16,953Proceeds from Matured or Called Securities Held to Maturity
    
    
    7
    
    
    
    7Proceeds from Sales of Investment Securities Available for Sale
    
    
    
    
    
    
    3,252Proceeds from Sales of Other Real Estate Owned
    
    
    1,752
    
    
    
    2,482Net Decrease in Loans Receivable
    
    
    44,680
    
    
    
    105,980Purchases of Investment Securities Available for Sale
    
    
    (145,083
    )
    
    
    (305
    )Purchases of Premises and Equipment
    
    
    (113
    )
    
    
    (223
    )Net Cash (Used In) Provided By Investing Activities
    
    
    (78,502
    )
    
    
    128,146CASH FLOWS FROM FINANCING ACTIVITIES:(Decrease) Increase in Deposits
    
    
    (35,781
    )
    
    
    (99,047
    )Repayment of Long-Term Federal Home Loan Bank Advances and Other Borrowings
    
    
    (413
    )
    
    
    (80
    )Net Change in Short-Term Federal Home Loan Bank Advances and Other Borrowings
    
    
    144
    
    
    
    2,681Net Cash Used In Financing Activities
    
    
    (36,050
    )
    
    
    (96,446
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (79,359
    )
    
    
    45,107Cash and Cash Equivalents at Beginning of Period
    
    
    249,720
    
    
    
    154,110CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    170,361
    
    
    $
    199,217SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash Paid During the Period for:Interest Paid
    
    $
    9,548
    
    
    $
    10,179Income Taxes Paid
    
    $
    
    
    
    $
    2Non-Cash Activities:Transfer of Loans to Loans Held for Sale
    
    $
    37,540
    
    
    $
    4,684Transfer of Loans to Other Real Estate Owned
    
    $
    1,476
    
    
    $
    4,397Loan Provided in the Sale of Loans Held for Sale
    
    $
    1,850
    
    
    $
    Loan Provided in the Sale of Other Real Estate Owned
    
    $
    511
    
    
    $
    190
  4




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010
 NOTE 1  BASIS OF PRESENTATION
  Form 10-Q
  Note 2  Summary of
Significant Accounting Policies
  NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION
   5




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION (Continued)
 Final Order and Written Agreement
   Ratio of Tangible ShareholdersDate
    
    Equity to Total Tangible AssetsFrom December 31, 2010 and Until the Order is Terminated
    
    Not Less Than 9.5 Percent
   6




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION (Continued)
 Risk-Based Capital
   To be Categorized asMinimum
    
    Well CapitalizedRegulatory
    
    under Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)March 31, 2011Total Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    294,446
    
    
    
    13.05
    %
    
    $
    180,446
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    292,650
    
    
    
    13.00
    %
    
    $
    180,055
    
    
    
    8.00
    %
    
    $
    225,069
    
    
    
    10.00
    %Tier 1 Capital (to Risk-Weighted Assets):Hanmi Financial
    
    $
    247,235
    
    
    
    10.96
    %
    
    $
    90,223
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    263,285
    
    
    
    11.70
    %
    
    $
    90,027
    
    
    
    4.00
    %
    
    $
    135,041
    
    
    
    6.00
    %Tier 1 Capital (to Average Assets):Hanmi Financial
    
    $
    247,235
    
    
    
    8.51
    %
    
    $
    116,272
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    263,285
    
    
    
    9.08
    %
    
    $
    115,980
    
    
    
    4.00
    %
    
    $
    144,976
    
    
    
    5.00
    %
 Going Concern
   7




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 2  REGULATORY MATTERS AND GOING CONCERN CONSIDERATION (Continued)
  NOTE 3  FAIR VALUE MEASUREMENTS
 Fair Value Option and Fair Value Measurements
   Fair Value Measurements and Disclosures (Topic 820)
  Investment Securities Available for Sale
 8




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
    SBA Loans Held for Sale
 Non-performing Loans Held for Sale
 Impaired Loans Receivables,
 Other Real Estate Owned
 9




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
 Servicing Assets and Servicing Liabilities
 Other Intangible Assets
 Stock Warrants
 Fair Value Measurement
  
    
    Level 1
    
    Quoted prices (unadjusted) for identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.
    
    Level 2
    
    Significant other observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities, quoted prices in markets that are not active, and
other inputs that are observable or can be corroborated by observable market data.
    
    Level 3
    
    Significant unobservable inputs that reflect a companys own assumptions about
the assumptions that market participants would use in pricing an asset or liability.
   10




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
   Level 1
    
    
    Level 2
    
    
    Level 3SignificantObservableInputs WithQuoted Prices in
    
    
    No Active
    
    
    
    
    
    
    Balance as ofActive Markets
    
    
    Market With
    
    
    Significant
    
    
    March 31,for Identical
    
    
    Identical
    
    
    Unobservable
    
    
    2011 andAssets
    
    
    Characteristics
    
    
    Inputs
    
    
    December 31, 2010(In Thousands)March 31, 2011ASSETS:Debt Securities Available for Sale:Collateralized Mortgage Obligations
    
    $
    
    
    
    $
    183,299
    
    
    $
    
    
    
    $
    183,299U.S. Government Agency Securities
    
    
    177,068
    
    
    
    
    
    
    
    
    
    
    
    177,068Residential Mortgage-Backed Securities
    
    
    
    
    
    
    125,761
    
    
    $
    
    
    
    
    125,761Municipal Bonds
    
    
    
    
    
    
    21,036
    
    
    
    
    
    
    
    21,036Corporate Bonds
    
    
    
    
    
    
    20,114
    
    
    
    
    
    
    
    20,114Asset-Backed Securities
    
    
    
    
    
    
    6,882
    
    
    
    
    
    
    
    6,882Other Securities
    
    
    
    
    
    
    3,243
    
    
    
    
    
    
    
    3,243Total Debt Securities Available for Sale
    
    $
    177,068
    
    
    $
    360,335
    
    
    $
    
    
    
    $
    537,403Equity Securities Available for Sale:Financial Services Industry
    
    $
    953
    
    
    
    
    
    
    
    
    
    
    $
    953Total Equity Securities Available for Sale
    
    $
    953
    
    
    $
    
    
    
    $
    
    
    
    $
    953Total Securities Available for Sale
    
    $
    178,021
    
    
    $
    360,335
    
    
    $
    
    
    
    $
    538,356LIABILITIES:Stock Warrants
    
    $
    
    
    
    $
    
    
    
    $
    1,614
    
    
    $
    1,614December 31, 2010ASSETS:Debt Securities Available for Sale:Collateralized Mortgage Obligations
    
    $
    
    
    
    $
    137,193
    
    
    $
    
    
    
    $
    137,193U.S. Government Agency Securities
    
    
    113,334
    
    
    
    
    
    
    
    
    
    
    
    113,334Residential Mortgage-Backed Securities
    
    
    
    
    
    
    109,842
    
    
    $
    
    
    
    
    109,842Municipal Bonds
    
    
    
    
    
    
    21,028
    
    
    
    
    
    
    
    21,028Corporate Bonds
    
    
    
    
    
    
    20,205
    
    
    
    
    
    
    
    20,205Asset-Backed Securities
    
    
    
    
    
    
    7,384
    
    
    
    
    
    
    
    7,384Other Securities
    
    
    
    
    
    
    3,259
    
    
    
    
    
    
    
    3,259Total Debt Securities Available for Sale
    
    $
    113.334
    
    
    $
    298,911
    
    
    $
    
    
    
    $
    412,245Equity Securities Available for Sale:Financial Services Industry
    
    $
    873
    
    
    
    
    
    
    
    
    
    
    $
    873Total Equity Securities Available for Sale
    
    $
    873
    
    
    $
    
    
    
    $
    
    
    
    $
    873Total Securities Available for Sale
    
    $
    114,207
    
    
    $
    298,911
    
    
    $
    
    
    
    $
    413,118LIABILITIES:Stock Warrants
    
    $
    
    
    
    $
    
    
    
    $
    1,600
    
    
    $
    1,600
 11




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Realized andUnrealizedBeginning
    
    
    
    
    
    Realized and
    
    Gains or Losses
    
    
    
    
    
    EndingBalance as of
    
    Purchases,
    
    Unrealized
    
    in Other
    
    Transfers
    
    Balance as ofJanuary 1,
    
    Issuances and
    
    Gains or Losses
    
    Comprehensive
    
    In and/or Out
    
    March 31,2011
    
    Settlements
    
    in Earnings
    
    Income
    
    of Level 3
    
    2011(In Thousands)LIABILITIES:Stock Warrants (1)
    
    $
    (1,600
    )
    
    $
    
    
    
    $
    (14
    )
    
    $
    
    
    
    $
    
    
    
    $
    (1,614
    )
 
 (1)
    
    Reflects warrants issued to Cappello Capital Corp. in connection with services it
provided to us as a placement agent in connection with our best efforts public offering and as our
financial adviser in connection with our completed rights offering. The warrants were immediately
exercisable when issued at a purchase price of $1.20 per share of our common stock and expire on
October 14, 2015. See Note 8  Stockholders Equity for more details. Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
  Level 1
    
    Level 2
    
    Level 3SignificantObservableInputs WithQuoted Prices in
    
    No Active
    
    
    
    
    
    Losses During TheActive Markets
    
    Market With
    
    Significant
    
    Three Monthsfor Identical
    
    Identical
    
    Unobservable
    
    Ended March 31,Assets
    
    Characteristics
    
    Inputs
    
    2011 and 2010(In Thousands)March 31, 2011ASSETS:Nonperforming Loans Held for Sale
    
    $
    
    
    
    $
    
    
    
    $
    30,713
    (1)
    
    $
    12,965Impaired Loans
    
    $
    
    
    
    $
    
    
    
    $
    155,352
    (2)
    
    $
    3,883Other Real Estate Owned
    
    $
    
    
    
    $
    
    
    
    $
    1,350
    (3)
    
    $
    882March 31, 2010ASSETS:Nonperforming Loans Held for Sale
    
    $
    
    
    
    $
    
    
    
    $
    4,684
    (4)
    
    $
    577Impaired Loans
    
    $
    
    
    
    $
    
    
    
    $
    175,701
    (5)
    
    $
    27,079Other Real Estate Owned
    
    $
    
    
    
    $
    
    
    
    $
    20,137
    (6)
    
    $
    5,537
 
 (1)
    
    Includes commercial property loans of $3.2 million, commercial term loan of $21.3 million, and SBA loans of $6.2 million.(2)
    
    Includes real estate loans of $70.5 million, commercial and industrial loans of $84.4 million, and consumer loans of $517,000 .(3)
    
    Includes properties from the foreclosure of commercial property loans of $360,000 and SBA loans of $990,000.(4)
    
    Includes commercial term loans of $4.7 million.(5)
    
    Includes real estate loans of $70.2 million, commercial and industrial loans of $104.8 million, and consumer loans of $659,000 .(6)
    
    Includes properties from the foreclosure of real estate loans of $19.7 million, and commercial and industrial loans of $468,000.  12




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
   March 31, 2011
    
    December 31, 2010Carrying
    
    Estimated
    
    Carrying
    
    Estimatedor Contract
    
    Fair
    
    or Contract
    
    FairAmount
    
    Value
    
    Amount
    
    Value(In Thousands)Financial Assets:Cash and Cash Equivalents
    
    $
    170,361
    
    
    $
    170,361
    
    
    $
    249,720
    
    
    $
    249,720Investment Securities Held to Maturity
    
    
    838
    
    
    
    840
    
    
    
    845
    
    
    
    847Investment Securities Available for Sale
    
    
    538,356
    
    
    
    538,356
    
    
    
    413,118
    
    
    
    413,118Loans Receivable, Net of Allowance for Loan Losses
    
    
    2,047,635
    
    
    
    2,009,569
    
    
    
    2,121,067
    
    
    
    2,061,988Accrued Interest Receivable
    
    
    8,796
    
    
    
    8,796
    
    
    
    8,048
    
    
    
    8,048Investment in Federal Home Loan Bank Stock
    
    
    26,200
    
    
    
    26,200
    
    
    
    27,282
    
    
    
    27,282Investment in Federal Reserve Bank Stock
    
    
    7,449
    
    
    
    7,449
    
    
    
    7,449
    
    
    
    7,449Financial Liabilities:Noninterest-Bearing Deposits
    
    
    576,733
    
    
    
    576,733
    
    
    
    546,815
    
    
    
    546,815Interest-Bearing Deposits
    
    
    1,854,207
    
    
    
    1,864,023
    
    
    
    1,919,906
    
    
    
    1,927,314Borrowings
    
    
    237,357
    
    
    
    232,409
    
    
    
    237,626
    
    
    
    233,077Accrued Interest Payable
    
    
    14,184
    
    
    
    14,184
    
    
    
    15,966
    
    
    
    15,966Off-Balance Sheet Items:Commitments to Extend Credit
    
    
    167,225
    
    
    
    106
    
    
    
    178,424
    
    
    
    130Standby Letters of Credit
    
    
    15,103
    
    
    
    42
    
    
    
    15,226
    
    
    
    50
  Cash and Cash Equivalents
 Investment Securities
 Loans Receivable, Net of Allowance for Loan Losses
 13




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 3  FAIR VALUE MEASUREMENTS (Continued)
 Accrued Interest Receivable
 Investment in Federal Home Loan Bank and Federal Reserve Bank Stock
 Noninterest-Bearing Deposits
 Interest-Bearing Deposits
 Borrowings
 Accrued Interest Payable
 Stock Warrants
 Commitments to Extend Credit and Standby Letters of Credit
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value(In Thousands)March 31, 2011:Municipal Bonds
    
    $
    697
    
    
    $
    
    
    
    $
    
    
    
    $
    697Mortgage-Backed Securities (1)
    
    
    141
    
    
    
    2
    
    
    
    
    
    
    
    143$
    838
    
    
    $
    2
    
    
    $
    
    
    
    $
    840December 31, 2010:Municipal Bonds
    
    $
    696
    
    
    $
    
    
    
    $
    
    
    
    $
    696Mortgage-Backed Securities (1)
    
    
    149
    
    
    
    2
    
    
    
    
    
    
    
    151$
    845
    
    
    $
    2
    
    
    $
    
    
    
    $
    847
 
 (1)
    
    Collateralized by residential mortgages and guaranteed by U.S. government sponsored entities. 14




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 4  INVESTMENT SECURITIES
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value(In Thousands)March 31, 2011:Collateralized Mortgage Obligations (1)
    
    $
    184,732
    
    
    $
    503
    
    
    $
    1,936
    
    
    $
    183,299U.S. Government Agency Securities
    
    
    178,055
    
    
    
    67
    
    
    
    1,054
    
    
    
    177,068Mortgage-Backed Securities (1)
    
    
    124,477
    
    
    
    2,014
    
    
    
    730
    
    
    
    125,761Municipal Bonds
    
    
    22,366
    
    
    
    49
    
    
    
    1,379
    
    
    
    21,036Corporate Bonds
    
    
    20,452
    
    
    
    10
    
    
    
    348
    
    
    
    20,114Asset-Backed Securities
    
    
    6,651
    
    
    
    231
    
    
    
    
    
    
    
    6,882Other Securities
    
    
    3,305
    
    
    
    
    
    
    
    62
    
    
    
    3,243Equity Securities (2)
    
    
    647
    
    
    
    306
    
    
    
    
    
    
    
    953$
    540,685
    
    
    $
    3,180
    
    
    $
    5,509
    
    
    $
    538,356December 31, 2010:Collateralized Mortgage Obligations (1)
    
    $
    139,053
    
    
    $
    470
    
    
    $
    2,330
    
    
    $
    137,193U.S. Government Agency Securities
    
    
    114,066
    
    
    
    98
    
    
    
    830
    
    
    
    113,334Mortgage-Backed Securities (1)
    
    
    108,436
    
    
    
    2,137
    
    
    
    731
    
    
    
    109,842Municipal Bonds
    
    
    22,420
    
    
    
    48
    
    
    
    1,440
    
    
    
    21,028Corporate Bonds
    
    
    20,449
    
    
    
    13
    
    
    
    257
    
    
    
    20,205Asset-Backed Securities
    
    
    7,115
    
    
    
    269
    
    
    
    
    
    
    
    7,384Other Securities
    
    
    3,305
    
    
    
    
    
    
    
    46
    
    
    
    3,259Equity Securities (2)
    
    
    647
    
    
    
    226
    
    
    
    
    
    
    
    873$
    415,491
    
    
    $
    3,261
    
    
    $
    5,634
    
    
    $
    413,118
 
 (1)
    
    Collateralized by residential mortgages and guaranteed by U.S. government
sponsored entities. .(2)
    
    Balances presented for amortized cost, representing two corporate bonds, were
net of an OTTI charge of $790,000, which was related to a credit loss, as of December 31,
2010. We recorded an OTTI charge of $790,000 to write down the value of one investment
security to its fair value during the year ended December 31, 2010.  Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Estimated
    
    
    Amortized
    
    
    EstimatedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(In Thousands)Within One Year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Over One Year Through Five Years
    
    
    178,438
    
    
    
    177,230
    
    
    
    697
    
    
    
    697Over Five Years Through Ten Years
    
    
    32,440
    
    
    
    32,238
    
    
    
    
    
    
    
    Over Ten Years
    
    
    19,951
    
    
    
    18,875
    
    
    
    
    
    
    
    Collateralized Mortgage Obligations
    
    
    184,732
    
    
    
    183,299
    
    
    
    
    
    
    
    Mortgage-Backed Securities
    
    
    124,477
    
    
    
    125,761
    
    
    
    141
    
    
    
    143Equity Securities
    
    
    647
    
    
    
    953
    
    
    
    
    
    
    
    $
    540,685
    
    
    $
    538,356
    
    
    $
    838
    
    
    $
    840
 Investments  Debt and Equity Securities,
 15




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 4  INVESTMENT SECURITIES (Continued)
  Holding PeriodLess than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    Estimated
    
    
    Number
    
    
    Gross
    
    
    Estimated
    
    
    Number
    
    
    Gross
    
    
    Estimated
    
    
    NumberInvestment Securities
    
    Unrealized
    
    
    Fair
    
    
    of
    
    
    Unrealized
    
    
    Fair
    
    
    of
    
    
    Unrealized
    
    
    Fair
    
    
    ofAvailable for Sale
    
    Losses
    
    
    Value
    
    
    Securities
    
    
    Losses
    
    
    Value
    
    
    Securities
    
    
    Losses
    
    
    Value
    
    
    Securities(In Thousands)March 31, 2011:Mortgage-Backed Securities
    
    $
    730
    
    
    $
    73,164
    
    
    
    21
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    730
    
    
    $
    73,164
    
    
    
    21Collateralized Mortgage
Obligations
    
    
    1,936
    
    
    
    127,190
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,936
    
    
    
    127,190
    
    
    
    27Municipal Bonds
    
    
    1,379
    
    
    
    17,914
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,379
    
    
    
    17,914
    
    
    
    12U.S. Government Agency
Securities
    
    
    1,054
    
    
    
    131,016
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,054
    
    
    
    131,016
    
    
    
    35Other Securities
    
    
    11
    
    
    
    1,989
    
    
    
    2
    
    
    
    52
    
    
    
    948
    
    
    
    1
    
    
    
    63
    
    
    
    2,937
    
    
    
    3Corporate Bonds
    
    
    348
    
    
    
    17,120
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    348
    
    
    
    17,120
    
    
    
    5$
    5,458
    
    
    $
    368,393
    
    
    
    102
    
    
    $
    52
    
    
    $
    948
    
    
    
    1
    
    
    $
    5,510
    
    
    $
    369,341
    
    
    
    103December 31, 2010:Mortgage-Backed Securities
    
    $
    731
    
    
    $
    62,738
    
    
    
    16
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    731
    
    
    $
    62,738
    
    
    
    16Collateralized Mortgage
Obligations
    
    
    2,330
    
    
    
    99,993
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,330
    
    
    
    99,993
    
    
    
    20Municipal Bonds
    
    
    1,440
    
    
    
    16,907
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,440
    
    
    
    16,907
    
    
    
    11U.S. Government Agency
Securities
    
    
    830
    
    
    
    69,266
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    830
    
    
    
    69,266
    
    
    
    14Other Securities
    
    
    3
    
    
    
    1,997
    
    
    
    2
    
    
    
    43
    
    
    
    957
    
    
    
    1
    
    
    
    46
    
    
    
    2,954
    
    
    
    3Corporate Bonds
    
    
    257
    
    
    
    17,210
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257
    
    
    
    17,210
    
    
    
    5$
    5,591
    
    
    $
    268,111
    
    
    
    68
    
    
    $
    43
    
    
    $
    957
    
    
    
    1
    
    
    $
    5,634
    
    
    $
    269,068
    
    
    
    69
     16




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 4  INVESTMENT SECURITIES (Continued)
    Three Months Ended March 31,2011
    
    
    2010(In Thousands)Gross Realized Gains on Sales of Investment Securities
    
    $
    
    
    
    $
    210Gross Realized Losses on Sales of Investment Securities
    
    
    
    
    
    
    (105
    )Net Realized Gains on Sales of Investment Securities
    
    $
    
    
    
    $
    105Proceeds from Sales of Investment Securities
    
    $
    
    
    
    $
    3,252Tax Expense on Sales of Investment Securities
    
    $
    
    
    
    $
    45
   17




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS
    Loans Receivable
  March 31,
    
    
    December 31,2011
    
    
    2010(In Thousands)Real Estate Loans:Commercial Property
    
    $
    695,357
    
    
    $
    729,222Construction
    
    
    56,707
    
    
    
    60,995Residential Property
    
    
    60,352
    
    
    
    62,645Total Real Estate Loans
    
    
    812,416
    
    
    
    852,862Commercial and Industrial Loans: (1)Commercial Term
    
    
    1,058,250
    
    
    
    1,118,999SBA
    
    
    101,079
    
    
    
    105,688Commercial Lines of Credit
    
    
    59,318
    
    
    
    59,056International
    
    
    46,860
    
    
    
    44,167Total Commercial and Industrial Loans
    
    
    1,265,507
    
    
    
    1,327,910Consumer Loans
    
    
    48,120
    
    
    
    50,300Total Gross Loans
    
    
    2,126,043
    
    
    
    2,231,072Allowance for Loans Losses
    
    
    (125,780
    )
    
    
    (146,059
    )Deferred Loan Fees
    
    
    (277
    )
    
    
    (566
    )Loans Receivable, Net
    
    $
    1,999,986
    
    
    $
    2,084,447
 
 (1)
    
    Commercial and industrial loans include owner-occupied property loans of
$864.7 million and $894.8 million as of March 31, 2011 and December 31, 2010, respectively.  18




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
  CommercialReal Estate
    
    
    and Industrial
    
    
    Consumer
    
    
    Total(Dollars in Thousands)March 31, 2011Loans Held for Sale:Beginning Balance
    
    $
    3,666
    
    
    $
    32,954
    
    
    $
    
    
    
    $
    36,620Reclassification from Loan
Receivables to Loans Held for sale
    
    
    17,909
    
    
    
    23,081
    
    
    
    
    
    
    
    40,990Sales of Loans Held for sale
    
    
    (17,989
    )
    
    
    (9,316
    )
    
    
    
    
    
    
    (27,305
    )Principal Payoffs and Amortization
    
    
    (7
    )
    
    
    (407
    )
    
    
    
    
    
    
    (414
    )Valuation Adjustments
    
    
    (66
    )
    
    
    (2,176
    )
    
    
    
    
    
    
    (2,242
    )Ending Balance
    
    $
    3,513
    
    
    $
    44,136
    
    
    $
    
    
    
    $
    47,649March 31, 2010Loans Held for Sale:Beginning Balance
    
    $
    
    
    
    $
    5,010
    
    
    $
    
    
    
    $
    5,010Reclassification from Loan
Receivables to Loans Held for sale
    
    
    12,816
    
    
    
    19,153
    
    
    
    
    
    
    
    31,969Sales of Loans Held for sale
    
    
    (12,816
    )
    
    
    (13,993
    )
    
    
    
    
    
    
    (26,809
    )Principal Payoffs and Amortization
    
    
    
    
    
    
    (66
    )
    
    
    
    
    
    
    (66
    )Valuation Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending Balance
    
    $
    
    
    
    $
    10,104
    
    
    $
    
    
    
    $
    10,104
  Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
  As of and for the Three Months EndedMarch 31,
    
    
    December 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2010(In Thousands)Allowance for Loan Losses:Balance at Beginning of Period
    
    $
    146,059
    
    
    $
    176,063
    
    
    $
    144,996Actual Charge-Offs
    
    
    (25,181
    )
    
    
    (37,787
    )
    
    
    (30,114
    )Recoveries on Loans Previously Charged Off
    
    
    3,626
    
    
    
    2,538
    
    
    
    3,721Net Loan Charge-Offs
    
    
    (21,555
    )
    
    
    (35,249
    )
    
    
    (26,393
    )Provision Charged to Operating Expense
    
    
    1,276
    
    
    
    5,245
    
    
    
    59,217Balance at End of Period
    
    $
    125,780
    
    
    $
    146,059
    
    
    $
    177,820Allowance for Off-Balance Sheet Items:Balance at Beginning of Period
    
    $
    3,417
    
    
    $
    3,662
    
    
    $
    3,876Provision Charged to (Reversal of Charged to) Operating Expense
    
    
    (1,276
    )
    
    
    (245
    )
    
    
    (1,221
    )Balance at End of Period
    
    $
    2,141
    
    
    $
    3,417
    
    
    $
    2,655
 19




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
  CommercialReal Estate
    
    
    and Industrial
    
    
    Consumer
    
    
    Unallocated
    
    
    Total(Dollars in Thousands)March 31, 2011Allowance for Loan Losses:Beginning Balance
    
    $
    32,766
    
    
    $
    108,986
    
    
    $
    2,079
    
    
    $
    2,228
    
    
    $
    146,059Charge-Offs
    
    
    7,053
    
    
    
    17,955
    
    
    
    173
    
    
    
    
    
    
    
    25,181Recoveries on Loans Previously Charged Off
    
    
    521
    
    
    
    3,096
    
    
    
    9
    
    
    
    
    
    
    
    3,626Provision
    
    
    (350
    )
    
    
    (249
    )
    
    
    (183
    )
    
    
    2,058
    
    
    
    1,276Ending Balance
    
    $
    25,884
    
    
    $
    93,878
    
    
    $
    1,732
    
    
    $
    4,286
    
    
    $
    125,780Ending Balance: Individually Evaluated for Impairment
    
    $
    3,855
    
    
    $
    27,599
    
    
    $
    81
    
    
    $
    
    
    
    $
    31,535Ending Balance: Collectively Evaluated for Impairment
    
    $
    22,029
    
    
    $
    66,279
    
    
    $
    1,651
    
    
    $
    4,286
    
    
    $
    94,245Loans Receivable:Ending Balance
    
    $
    812,416
    
    
    $
    1,265,507
    
    
    $
    48,120
    
    
    $
    
    
    
    $
    2,126,043Ending Balance: Individually Evaluated for Impairment
    
    $
    75,154
    
    
    $
    107,585
    
    
    $
    903
    
    
    $
    
    
    
    $
    183,642Ending Balance: Collectively Evaluated for Impairment
    
    $
    737,262
    
    
    $
    1,157,922
    
    
    $
    47,217
    
    
    $
    
    
    
    $
    1,942,401March 31, 2010Allowance for Loan Losses:Beginning Balance
    
    $
    30,080
    
    
    $
    112,225
    
    
    $
    2,691
    
    
    $
    
    
    
    $
    144,996Charge-Offs
    
    
    5,404
    
    
    
    24,091
    
    
    
    619
    
    
    
    
    
    
    
    30,114Recoveries on Loans Previously Charged Off
    
    
    1,703
    
    
    
    1,982
    
    
    
    36
    
    
    
    
    
    
    
    3,721Provision
    
    
    5,218
    
    
    
    53,878
    
    
    
    121
    
    
    
    
    
    
    
    59,217Ending Balance
    
    $
    31,597
    
    
    $
    143,994
    
    
    $
    2,229
    
    
    $
    
    
    
    $
    177,820Ending Balance: Individually Evaluated for Impairment
    
    $
    4,213
    
    
    $
    22,685
    
    
    $
    268
    
    
    $
    
    
    
    $
    27,166Ending Balance: Collectively Evaluated for Impairment
    
    $
    27,384
    
    
    $
    121,309
    
    
    $
    1,961
    
    
    $
    
    
    
    $
    150,654Loans Receivable:Ending Balance
    
    $
    986,417
    
    
    $
    1,628,446
    
    
    $
    58,886
    
    
    $
    
    
    
    $
    2,673,749Ending Balance: Individually Evaluated for Impairment
    
    $
    110,358
    
    
    $
    143,669
    
    
    $
    659
    
    
    $
    
    
    
    $
    254,686Ending Balance: Collectively Evaluated for Impairment
    
    $
    876,059
    
    
    $
    1,484,777
    
    
    $
    58,227
    
    
    $
    
    
    
    $
    2,419,063
 Credit Quality Indicators
      20




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
        21




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
 Pass
    
    
    Criticized
    
    
    Classified(Grade 0-4)
    
    
    (Grade 5)
    
    
    (Grade 6-7)
    
    
    Total Loans(In Thousands)March 31, 2011:Real Estate Loans:Commercial PropertyRetail
    
    $
    308,057
    
    
    $
    18,347
    
    
    $
    30,391
    
    
    $
    356,795Land
    
    
    3,639
    
    
    
    
    
    
    
    28,596
    
    
    
    32,235Other
    
    
    253,168
    
    
    
    20,040
    
    
    
    33,119
    
    
    
    306,327Construction
    
    
    8,752
    
    
    
    18,758
    
    
    
    29,197
    
    
    
    56,707Residential Property
    
    
    56,956
    
    
    
    
    
    
    
    3,396
    
    
    
    60,352Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    123,222
    
    
    
    25,507
    
    
    
    55,678
    
    
    
    204,407Secured by Real Estate
    
    
    607,526
    
    
    
    114,749
    
    
    
    131,568
    
    
    
    853,843Commercial Lines of Credit
    
    
    41,684
    
    
    
    9,902
    
    
    
    7,732
    
    
    
    59,318SBA
    
    
    65,658
    
    
    
    2,385
    
    
    
    33,036
    
    
    
    101,079International
    
    
    41,422
    
    
    
    4,786
    
    
    
    652
    
    
    
    46,860Consumer Loans
    
    
    45,670
    
    
    
    590
    
    
    
    1,860
    
    
    
    48,120Total
    
    $
    1,555,754
    
    
    $
    215,064
    
    
    $
    355,225
    
    
    $
    2,126,043December 31, 2010:Real Estate Loans:Commercial PropertyRetail
    
    $
    302,696
    
    
    $
    18,507
    
    
    $
    38,568
    
    
    $
    359,771Land
    
    
    3,845
    
    
    
    
    
    
    
    37,353
    
    
    
    41,198Other
    
    
    265,957
    
    
    
    20,804
    
    
    
    41,493
    
    
    
    328,254Construction
    
    
    12,958
    
    
    
    25,897
    
    
    
    22,139
    
    
    
    60,994Residential Property
    
    
    59,329
    
    
    
    
    
    
    
    3,315
    
    
    
    62,644Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    134,709
    
    
    
    24,620
    
    
    
    63,739
    
    
    
    223,068Secured by Real Estate
    
    
    617,200
    
    
    
    107,645
    
    
    
    171,086
    
    
    
    895,931Commercial Lines of Credit
    
    
    40,195
    
    
    
    8,019
    
    
    
    10,841
    
    
    
    59,055SBA
    
    
    68,994
    
    
    
    731
    
    
    
    35,965
    
    
    
    105,690International
    
    
    38,447
    
    
    
    4,693
    
    
    
    1,027
    
    
    
    44,167Consumer Loans
    
    
    48,027
    
    
    
    347
    
    
    
    1,926
    
    
    
    50,300Total
    
    $
    1,592,357
    
    
    $
    211,263
    
    
    $
    427,452
    
    
    $
    2,231,072
 22




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
  Accruing 9090 Days or
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Days or30-59 Days Past
    
    
    60-89 Days
    
    
    More Past
    
    
    Total Past
    
    
    
    
    
    
    
    
    
    
    More PastDue
    
    
    Past Due
    
    
    Due
    
    
    Due
    
    
    Current
    
    
    Total Loans
    
    
    Due(In Thousands)March 31, 2011:Real Estate Loans:Commercial PropertyRetail
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    356,796
    
    
    $
    356,796
    
    
    $
    Land
    
    
    1,000
    
    
    
    
    
    
    
    22,523
    
    
    
    23,523
    
    
    
    8,711
    
    
    
    32,234
    
    
    
    Other
    
    
    1,852
    
    
    
    688
    
    
    
    517
    
    
    
    3,057
    
    
    
    303,270
    
    
    
    306,327
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    19,750
    
    
    
    19,750
    
    
    
    36,957
    
    
    
    56,707
    
    
    
    Residential Property
    
    
    2,069
    
    
    
    
    
    
    
    1,342
    
    
    
    3,411
    
    
    
    56,941
    
    
    
    60,352
    
    
    
    Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    2,309
    
    
    
    1,743
    
    
    
    2,863
    
    
    
    6,915
    
    
    
    197,493
    
    
    
    204,408
    
    
    
    Secured by Real Estate
    
    
    4,959
    
    
    
    3,503
    
    
    
    2,899
    
    
    
    11,361
    
    
    
    842,481
    
    
    
    853,842
    
    
    
    Commercial Lines of Credit
    
    
    1,266
    
    
    
    191
    
    
    
    1,422
    
    
    
    2,879
    
    
    
    56,439
    
    
    
    59,318
    
    
    
    SBA
    
    
    9,129
    
    
    
    1,554
    
    
    
    12,012
    
    
    
    22,695
    
    
    
    78,384
    
    
    
    101,079
    
    
    
    International
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,860
    
    
    
    46,860
    
    
    
    Consumer Loans
    
    
    126
    
    
    
    607
    
    
    
    148
    
    
    
    881
    
    
    
    47,239
    
    
    
    48,120
    
    
    
    Total
    
    $
    22,710
    
    
    $
    8,286
    
    
    $
    63,476
    
    
    $
    94,472
    
    
    $
    2,031,571
    
    
    $
    2,126,043
    
    
    $
    December 31, 2010:Real Estate Loans:Commercial PropertyRetail
    
    $
    
    
    
    $
    
    
    
    $
    7,857
    
    
    $
    7,857
    
    
    $
    351,913
    
    
    $
    359,770
    
    
    $
    Land
    
    
    
    
    
    
    
    
    
    
    25,725
    
    
    
    25,725
    
    
    
    15,471
    
    
    
    41,196
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    7,212
    
    
    
    7,212
    
    
    
    321,043
    
    
    
    328,255
    
    
    
    Construction
    
    
    10,409
    
    
    
    
    
    
    
    8,477
    
    
    
    18,886
    
    
    
    42,108
    
    
    
    60,994
    
    
    
    Residential Property
    
    
    522
    
    
    
    
    
    
    
    1,240
    
    
    
    1,762
    
    
    
    60,883
    
    
    
    62,645
    
    
    
    Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    2,208
    
    
    
    2,781
    
    
    
    6,842
    
    
    
    11,831
    
    
    
    211,237
    
    
    
    223,068
    
    
    
    Secured by Real Estate
    
    
    5,111
    
    
    
    3,720
    
    
    
    10,530
    
    
    
    19,361
    
    
    
    876,570
    
    
    
    895,931
    
    
    
    Commercial Lines of Credit
    
    
    454
    
    
    
    
    
    
    
    1,745
    
    
    
    2,199
    
    
    
    56,857
    
    
    
    59,056
    
    
    
    SBA
    
    
    2,287
    
    
    
    8,205
    
    
    
    13,957
    
    
    
    24,449
    
    
    
    81,241
    
    
    
    105,690
    
    
    
    International
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,167
    
    
    
    44,167
    
    
    
    Consumer Loans
    
    
    596
    
    
    
    202
    
    
    
    865
    
    
    
    1,663
    
    
    
    48,637
    
    
    
    50,300
    
    
    
    Total
    
    $
    21,587
    
    
    $
    14,908
    
    
    $
    84,450
    
    
    $
    120,945
    
    
    $
    2,110,127
    
    
    $
    2,231,072
    
    
    $
    
 23




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
 Impaired Loans
    24




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
  InterestIncomeWith No
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RecognizedUnpaid
    
    
    Related
    
    
    With an
    
    
    
    
    
    
    Average
    
    
    for the ThreeRecorded
    
    
    Principal
    
    
    Allowance
    
    
    Allowance
    
    
    Related
    
    
    Recorded
    
    
    MonthsInvestment
    
    
    Balance
    
    
    Recorded
    
    
    Recorded
    
    
    Allowance
    
    
    Investment
    
    

Ended (1)(In Thousands)March 31, 2011:Real Estate Loans:Commercial PropertyRetail
    
    $
    16,757
    
    
    $
    17,134
    
    
    $
    7,204
    
    
    $
    9,553
    
    
    $
    1,881
    
    
    $
    17,016
    
    
    $
    174Land
    
    
    27,515
    
    
    
    27,515
    
    
    
    22,523
    
    
    
    4,992
    
    
    
    1,602
    
    
    
    29,655
    
    
    
    Other
    
    
    5,448
    
    
    
    5,578
    
    
    
    3,470
    
    
    
    1,978
    
    
    
    138
    
    
    
    5,383
    
    
    
    28Construction
    
    
    23,421
    
    
    
    23,643
    
    
    
    14,264
    
    
    
    9,157
    
    
    
    195
    
    
    
    23,536
    
    
    
    76Residential Property
    
    
    2,014
    
    
    
    2,091
    
    
    
    1,651
    
    
    
    362
    
    
    
    39
    
    
    
    2,068
    
    
    
    10Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    12,785
    
    
    
    13,339
    
    
    
    2,149
    
    
    
    10,636
    
    
    
    9,057
    
    
    
    13,229
    
    
    
    145Secured by Real Estate
    
    
    82,068
    
    
    
    83,757
    
    
    
    26,833
    
    
    
    55,235
    
    
    
    15,853
    
    
    
    83,745
    
    
    
    1,136Commercial Lines of Credit
    
    
    3,428
    
    
    
    3,483
    
    
    
    1,549
    
    
    
    1,879
    
    
    
    826
    
    
    
    3,469
    
    
    
    23SBA
    
    
    18,038
    
    
    
    19,503
    
    
    
    9,176
    
    
    
    8,862
    
    
    
    1,740
    
    
    
    18,712
    
    
    
    290International
    
    
    123
    
    
    
    139
    
    
    
    
    
    
    
    124
    
    
    
    123
    
    
    
    135
    
    
    
    2Consumer Loans
    
    
    903
    
    
    
    921
    
    
    
    654
    
    
    
    249
    
    
    
    81
    
    
    
    915
    
    
    
    10Total
    
    $
    192,500
    
    
    $
    197,103
    
    
    $
    89,473
    
    
    $
    103,027
    
    
    $
    31,535
    
    
    $
    197,863
    
    
    $
    1,894December 31, 2010:Real Estate Loans:Commercial PropertyRetail
    
    $
    17,606
    
    
    $
    18,050
    
    
    $
    6,336
    
    
    $
    11,270
    
    
    $
    1,543
    
    
    $
    21,190
    
    
    $
    30Land
    
    
    35,207
    
    
    
    35,295
    
    
    
    5,482
    
    
    
    29,725
    
    
    
    1,485
    
    
    
    40,858
    
    
    
    Other
    
    
    11,357
    
    
    
    11,476
    
    
    
    10,210
    
    
    
    1,147
    
    
    
    33
    
    
    
    15,342
    
    
    
    42Construction
    
    
    17,691
    
    
    
    17,831
    
    
    
    13,992
    
    
    
    3,699
    
    
    
    280
    
    
    
    12,311
    
    
    
    Residential Property
    
    
    1,926
    
    
    
    1,990
    
    
    
    1,926
    
    
    
    
    
    
    
    
    
    
    
    2,383
    
    
    
    19Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    17,847
    
    
    
    18,799
    
    
    
    6,465
    
    
    
    11,382
    
    
    
    10,313
    
    
    
    18,460
    
    
    
    198Secured by Real Estate
    
    
    80,213
    
    
    
    81,395
    
    
    
    35,154
    
    
    
    45,059
    
    
    
    11,831
    
    
    
    101,617
    
    
    
    318Commercial Lines of Credit
    
    
    4,067
    
    
    
    4,116
    
    
    
    1,422
    
    
    
    2,645
    
    
    
    1,321
    
    
    
    4,988
    
    
    
    15SBA
    
    
    17,715
    
    
    
    18,544
    
    
    
    7,112
    
    
    
    10,603
    
    
    
    2,122
    
    
    
    23,213
    
    
    
    301International
    
    
    127
    
    
    
    141
    
    
    
    
    
    
    
    127
    
    
    
    127
    
    
    
    397
    
    
    
    3Consumer Loans
    
    
    934
    
    
    
    951
    
    
    
    393
    
    
    
    541
    
    
    
    393
    
    
    
    639
    
    
    
    6Total
    
    $
    204,690
    
    
    $
    208,588
    
    
    $
    88,492
    
    
    $
    116,198
    
    
    $
    29,448
    
    
    $
    241,398
    
    
    $
    932
 
 (1)
    
    Represents interest income recognized on impaired loans subsequent to classification
as impaired. 25




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
  Three Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010(In Thousands)Interest Income That Would Have Been Recognized Had Impaired
Loans Performed in Accordance With Their Original Terms
    
    $
    4,429
    
    
    $
    5,569Less: Interest Income Recognized on Impaired Loans
    
    
    (2,485
    )
    
    
    (2,771
    )Interest Foregone on Impaired Loans
    
    $
    1,944
    
    
    $
    2,798
  Non-Accrual Loans
   March 31,
    
    
    December 31,2011
    
    
    2010(In Thousands)Real Estate Loans:Commercial PropertyRetail
    
    $
    8,669
    
    
    $
    10,998Land
    
    
    22,523
    
    
    
    25,725Other
    
    
    2,177
    
    
    
    8,953Construction
    
    
    23,421
    
    
    
    17,691Residential Property
    
    
    2,014
    
    
    
    1,926Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    10,370
    
    
    
    17,065Secured by Real Estate
    
    
    27,959
    
    
    
    31,053Commercial Lines of Credit
    
    
    2,169
    
    
    
    2,798SBA
    
    
    24,327
    
    
    
    25,054International
    
    
    123
    
    
    
    127Consumer Loans
    
    
    966
    
    
    
    1,047Total
    
    $
    124,718
    
    
    $
    142,437
 26




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 5  LOANS (Continued)
  March 31,
    
    
    December 31,2011
    
    
    2010(In Thousands)Non-Accrual Loans
    
    $
    124,718
    
    
    $
    142,437Loans 90 Days or More Past Due and Still Accruing
    
    
    
    
    
    
    Total Non-Performing Loans
    
    
    124,718
    
    
    
    142,437Other Real Estate Owned
    
    
    2,642
    
    
    
    4,089Total Non-Performing Assets
    
    $
    127,360
    
    
    $
    146,526Troubled Debt Restructurings on Accrual Status
    
    $
    43,311
    
    
    $
    47,395
    27




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 6  INCOME TAXES
    NOTE 7  SHARE-BASED COMPENSATION
 Share-Based Compensation Expense
  Unrecognized Share-Based Compensation Expense
  Unrecognized
    
    
    Average ExpectedExpense
    
    
    Recognition Period(Dollars in Thousands)Stock Option Awards
    
    $
    235
    
    
    2.0 yearsRestricted Stock Awards
    
    
    246
    
    
    2.5 yearsTotal Unrecognized Share-Based Compensation Expense
    
    $
    481
    
    
    2.2 years
 28




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 7  SHARE-BASED COMPENSATION (Continued)
 Share-Based Payment Award Activity
  Weighted-
    
    
    Weighted-
    
    
    AggregateAverage
    
    
    Average
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Remaining
    
    
    Value ofof
    
    
    Price Per
    
    
    Contractual
    
    
    In-the-MoneyShares
    
    
    Share
    
    
    Life
    
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding at Beginning of Period
    
    
    1,066,891
    
    
    $
    11.93
    
    
    5.3 years
    
    $
    
    (1)Options Granted
    
    
    150,000
    
    
    $
    1.30
    
    
    9.9 yearsOptions Expired
    
    
    (4,000
    )
    
    $
    18.22
    
    
    4.9 yearsOptions Forfeited
    
    
    (2,800
    )
    
    $
    18.00
    
    
    5.1 yearsOptions Outstanding at End of Period
    
    
    1,210,091
    
    
    $
    10.58
    
    
    5.7 years
    
    $
    
    (2)Options Exercisable at End of Period
    
    
    843,691
    
    
    $
    13.18
    
    
    4.7 years
    
    $
    
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on the
last trading day of the period, which was $1.15 as of December 31, 2010, over the
exercise price, multiplied by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on the last
trading day of the period, which was $1.24 as of March 31, 2011, over the exercise
price, multiplied by the number of options.  Restricted Stock Awards
  Weighted-AverageNumber
    
    
    Grant Dateof
    
    
    Fair ValueShares
    
    
    Per ShareRestricted Stock at Beginning of Period
    
    
    145,600
    
    
    $
    1.77Restricted Stock Granted
    
    
    60,000
    
    
    $
    1.30Restricted Stock Forfeited
    
    
    
    
    
    $
    Restricted Stock Vested
    
    
    (20,000
    )
    
    $
    1.30Restricted Stock at End of Period
    
    
    185,600
    
    
    $
    1.72
 NOTE 8  STOCKHOLDERS EQUITY
 Stock Warrants
 Derivatives and Hedging  Contracts in Entitys Own Stock
 29




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 8  STOCKHOLDERS EQUITY (Continued)
   NOTE 9  EARNINGS (LOSS) PER SHARE
   Three Months Ended March 31,2011
    
    
    2010(Numerator)
    
    
    (Denominator)
    
    
    
    
    
    
    (Numerator)
    
    
    (Denominator)Weighted-
    
    
    Per
    
    
    
    
    
    Weighted-
    
    
    PerNet
    
    
    Average
    
    
    Share
    
    
    Net
    
    
    Average
    
    
    ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    Shares
    
    
    Amount(Dollars in Thousands, Except Per Share Data)Basic EPS
    
    $
    10,437
    
    
    
    151,061,012
    
    
    $
    0.07
    
    
    $
    (49,486
    )
    
    
    50,998,990
    
    
    $
    (0.97
    )Effect of Dilutive Securities  Options, Warrants and
Unvested Restricted Stock
    
    
    
    
    
    
    226,561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted EPS
    
    $
    10,437
    
    
    
    151,287,573
    
    
    $
    0.07
    
    
    $
    (49,486
    )
    
    
    50,998,990
    
    
    $
    (0.97
    )
  NOTE 10  OFF-BALANCE SHEET COMMITMENTS
  30




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 10  OFF-BALANCE SHEET COMMITMENTS (Continued)
   March 31,
    
    
    December 31,2011
    
    
    2010(In Thousands)Commitments to Extend Credit
    
    $
    167,225
    
    
    $
    178,424Standby Letters of Credit
    
    
    15,103
    
    
    
    15,226Commercial Letters of Credit
    
    
    8,694
    
    
    
    11,899Unused Credit Card Lines
    
    
    23,990
    
    
    
    24,649Total Undisbursed Loan Commitments
    
    $
    215,012
    
    
    $
    230,198
 NOTE 11  SEGMENT REPORTING
  NOTE 12  LIQUIDITY
 Hanmi Financial
  Hanmi Bank
   31




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Continued)
 NOTE 12  LIQUIDITY (Continued)
      NOTE 13  SUBSEQUENT EVENTS
  32




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  FORWARD-LOOKING STATEMENTS
 Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
 
    
    our ability to continue as going concern;
    
    closure of Hanmi Bank and appointment of the Federal Deposit Insurance Corporation as
receiver;
    
    failure to complete the transaction contemplated by the securities purchase agreement
with Woori Finance Holdings Co., Ltd.;
    
    failure to raise enough capital to support our operations or meet our regulatory
requirements;
    
    failure to maintain adequate levels of capital to support our operations;
    
    conditions in the capital markets for raising capital;
    
    a significant number of customers failing to perform under their loans and other terms
of credit agreements;
    
    our compliance with and the effect of regulatory orders we have entered into and
potential future supervisory or governmental actions against us or Hanmi Bank;
    
    fluctuations in interest rates and a decline in the level of our interest rate spread;
    
    failure to attract or retain deposits and restrictions on taking brokered deposits;
    
    sources of liquidity available to us and to Hanmi Bank becoming limited or our
potential inability to access sufficient sources of liquidity when needed or the
requirement that we obtain government waivers to do so;
    
    adverse changes in domestic or global financial markets, economic conditions or
business conditions;
    
    regulatory restrictions on Hanmi Banks ability to pay dividends to us and on our
ability to make payments on our obligations;
    
    significant reliance on loans secured by real estate and the associated vulnerability
to downturns in the local real estate market, natural disasters and other variables
impacting the value of real estate;
    
    failure to attract or retain our key employees;
    
    adequacy of our allowance for loan losses;
    
    credit quality and the effect of credit quality on our provision for credit losses and
allowance for loan losses;
    
    volatility and disruption in financial, credit and securities markets, and the price of
our common stock;
    
    deterioration in financial markets that may result in impairment charges relating to
our securities portfolio;
    
    competition in our primary market areas;.
 33




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##### Table of Contents




    
    demographic changes in our primary market areas;
    
    global hostilities, acts of war or terrorism, including but not limited to, conflict
between North and South Korea;
    
    the effects of climate change and attendant regulation on our customers and borrowers;
    
    the effects of litigation against us;
    
    significant government regulations, legislation and potential changes thereto; and
    
    other risks described herein and in the other reports and statements we file with the SEC.
 Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations. Item 1A. Risk Factors Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 CRITICAL ACCOUNTING POLICIES
 Notes to Consolidated Financial Statements Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations  Critical Accounting Policies
 34




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##### Table of Contents



SELECTED FINANCIAL DATA
  As of and for theThree Months EndedMarch 31,2011
    
    
    2010(Dollars in Thousands, Except Per Share Data)AVERAGE BALANCES:Average Gross Loans, Net (1)
    
    $
    2,234,110
    
    
    $
    2,765,701Average Investment Securities
    
    $
    473,113
    
    
    $
    125,340Average Interest-Earning Assets
    
    $
    2,892,404
    
    
    $
    3,010,938Average Total Assets
    
    $
    2,906,253
    
    
    $
    3,086,198Average Deposits
    
    $
    2,458,836
    
    
    $
    2,662,960Average Borrowings
    
    $
    237,452
    
    
    $
    257,132Average Interest-Bearing Liabilities
    
    $
    2,133,097
    
    
    $
    2,360,992Average Stockholders Equity
    
    $
    178,221
    
    
    $
    137,931PER SHARE DATA:Earnings (Loss) Per Share  Basic
    
    $
    0.07
    
    
    $
    (0.97
    )Earnings (Loss) Per Share  Diluted
    
    $
    0.07
    
    
    $
    (0.97
    )Common Shares Outstanding
    
    
    151,258,390
    
    
    
    51,182,390Book Value Per Share (2)
    
    $
    1.22
    
    
    $
    1.97SELECTED PERFORMANCE RATIOS:Return on Average Assets (3) (4)
    
    
    1.46
    %
    
    
    (6.50
    %)Return on Average Stockholders Equity (3) (5)
    
    
    23.75
    %
    
    
    (145.50
    %)Efficiency Ratio (6)
    
    
    66.61
    %
    
    
    76.37
    %Net Interest Spread (7)
    
    
    3.27
    %
    
    
    3.29
    %Net Interest Margin (8)
    
    
    3.66
    %
    
    
    3.69
    %Average Stockholders Equity to Average Total Assets
    
    
    6.13
    %
    
    
    4.47
    %SELECTED CAPITAL RATIOS:(9)Total Risk-Based Capital Ratio:Hanmi Financial
    
    
    13.05
    %
    
    
    7.86
    %Hanmi Bank
    
    
    13.00
    %
    
    
    7.81
    %Tier 1 Risk-Based Capital Ratio:Hanmi Financial
    
    
    10.96
    %
    
    
    4.80
    %Hanmi Bank
    
    
    11.70
    %
    
    
    6.49
    %Tier 1 Leverage Ratio:Hanmi Financial
    
    
    8.51
    %
    
    
    4.20
    %Hanmi Bank
    
    
    9.08
    %
    
    
    5.68
    %SELECTED ASSET QUALITY RATIOS:Non-Performing Loans to Total Gross Loans (10)
    
    
    6.98
    %
    
    
    9.77
    %Non-Performing Assets to Total Assets (11)
    
    
    5.36
    %
    
    
    9.43
    %Net Loan Charge-Offs to Average Total Gross Loans (12)
    
    
    3.91
    %
    
    
    3.87
    %Allowance for Loan Losses to Total Gross Loans
    
    
    5.79
    %
    
    
    6.63
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    82.90
    %
    
    
    67.81
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs.(2)
    
    Total stockholders equity divided by common shares outstanding.(3)
    
    Calculation based upon annualized net income (loss).(4)
    
    Net income (loss) divided by average total assets.(5)
    
    Net income (loss) divided by average stockholders equity.(6)
    
    Total non-interest expenses divided by the sum of net interest income before provision for credit losses and total non-interest income.(7)
    
    Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities. Computed on a tax-equivalent basis using an effective marginal
rate of 35 percent.(8)
    
    Net interest income before provision for credit losses divided by average
interest-earning assets. Computed on a tax-equivalent basis using an effective marginal rate
of 35 percent.(9)
    
    The required ratios for a well-capitalized institution, as defined by regulations
of the Board of Governors of the Federal Reserve System, are 10 percent for the Total
Risk-Based Capital Ratio (total capital divided by total risk-weighted assets); 6 percent for
the Tier 1 Risk-Based Capital Ratio (Tier 1 capital divided by total risk-weighted assets);
and 5 percent for the Tier 1 Leverage Ratio (Tier 1 capital divided by average total assets).(10)
    
    Non-performing loans consist of non-accrual loans and loans past due 90 days or more and still accruing interest.(11)
    
    Non-performing assets consist of non-performing loans (see footnote (10) above) and other real estate owned.(12)
    
    Calculation based upon annualized net loan charge-offs. Non-GAAP Financial Measures
 Tangible Stockholders Equity to Tangible Assets Ratio
  35




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Hanmi Bank
 March 31,
    
    
    March 31,2011
    
    
    2010(In Thousands)Total Assets
    
    $
    2,872,804
    
    
    $
    3,011,524Less Intangible Assets
    
    
    (303
    )
    
    
    (1,058
    )Tangible Assets
    
    $
    2,872,501
    
    
    $
    3,010,466Total Stockholders Equity
    
    $
    261,639
    
    
    $
    178,513Less Intangible Assets
    
    
    (303
    )
    
    
    (1,058
    )Tangible Stockholders Equity
    
    $
    261,336
    
    
    $
    177,455Total Stockholders Equity to Total Assets Ratio
    
    
    9.11
    %
    
    
    5.93
    %Tangible Stockholders Equity to Tangible Assets Ratio
    
    
    9.10
    %
    
    
    5.89
    %
  EXECUTIVE OVERVIEW
     
    
    The Banks total risk-based capital ratio improved to 13.00% as of March 31,
2011 compared to 12.22% as of December 31, 2010. The Banks tangible common equity to
tangible assets also improved to 9.10% as of March 31, 2011 compared to 8.59% as of
December 31, 2010.
    
    Non-performing loans decreased to $151.7 million, or 6.98% of total gross
loans, as of March 31, 2011 compared to $169.0 million, or 7.45% as of December 31, 2010.
Non-performing assets decreased to $154.4 million, or 5.36% of total assets, as of March 31, 2011 compared to $173.1 million, or 5.95%
as of December 31, 2010.
 36




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##### Table of Contents




    
    The average loan yield improved by 23 basis points to 5.61% in the first
quarter of 2011 compared to 5.38% for the same period of 2010, reflecting the improvement
in credit quality.
    
    The cost of funds decreased primarily through downward re-pricing of matured
time deposits. The average funding cost decreased by 32 basis points to 1.17% in the first
quarter of 2011 compared to 1.49% for the same period of 2010.
 Outlook for 2011
     RESULTS OF OPERATIONS
 Net Interest Income Before Provision for Credit Losses
   37




---



##### Table of Contents



Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans,
Net (1)
    
    $
    2,234,110
    
    
    $
    30,905
    
    
    
    5.61
    %
    
    $
    2,765,701
    
    
    $
    36,695
    
    
    
    5.38
    %Municipal Securities:Taxable
    
    
    17,531
    
    
    
    178
    
    
    
    4.06
    %
    
    
    
    
    
    
    
    
    
    
    Tax 
Exempt (2)
    
    
    4,466
    
    
    
    62
    
    
    
    5.55
    %
    
    
    7,549
    
    
    
    118
    
    
    
    6.25
    %Obligations of Other U.S. Government Agencies
    
    
    146,312
    
    
    
    623
    
    
    
    1.70
    %
    
    
    32,120
    
    
    
    383
    
    
    
    4.77
    %Other Debt Securities
    
    
    304,804
    
    
    
    1,872
    
    
    
    2.46
    %
    
    
    85,671
    
    
    
    701
    
    
    
    3.27
    %Equity Securities
    
    
    35,557
    
    
    
    132
    
    
    
    1.48
    %
    
    
    39,369
    
    
    
    125
    
    
    
    1.27
    %Federal Funds Sold
    
    
    6,699
    
    
    
    8
    
    
    
    0.48
    %
    
    
    14,118
    
    
    
    17
    
    
    
    0.48
    %Term Federal Funds Sold
    
    
    19,778
    
    
    
    27
    
    
    
    0.55
    %
    
    
    
    
    
    
    
    
    
    
    Interest-Earning Deposits
    
    
    123,147
    
    
    
    89
    
    
    
    0.29
    %
    
    
    66,410
    
    
    
    55
    
    
    
    0.33
    %Total Interest-Earning Assets
    
    
    2,892,404
    
    
    
    33,896
    
    
    
    4.75
    %
    
    
    3,010,938
    
    
    
    38,094
    
    
    
    5.13
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    67,854
    
    
    
    
    
    
    
    
    
    
    
    67,157Allowance for Loan Losses
    
    
    (145,784
    )
    
    
    
    
    
    
    
    
    
    
    (157,296
    )Other Assets
    
    
    91,779
    
    
    
    
    
    
    
    
    
    
    
    165,399Total Noninterest-Earning Assets
    
    
    13,849
    
    
    
    
    
    
    
    
    
    
    
    75,260TOTAL ASSETS
    
    $
    2,906,253
    
    
    
    
    
    
    
    
    
    
    $
    3,086,198LIABILITIES AND STOCKHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    113,080
    
    
    
    749
    
    
    
    2.69
    %
    
    $
    115,625
    
    
    
    824
    
    
    
    2.89
    %Money Market Checking and NOW Accounts
    
    
    448,807
    
    
    
    1,002
    
    
    
    0.91
    %
    
    
    558,916
    
    
    
    1,622
    
    
    
    1.18
    %Time Deposits of $100,000 or More
    
    
    1,051,340
    
    
    
    4,059
    
    
    
    1.57
    %
    
    
    924,055
    
    
    
    4,677
    
    
    
    2.05
    %Other Time Deposits
    
    
    282,418
    
    
    
    925
    
    
    
    1.33
    %
    
    
    505,264
    
    
    
    2,581
    
    
    
    2.07
    %Federal Home Loan Bank Advances
    
    
    153,609
    
    
    
    333
    
    
    
    0.88
    %
    
    
    173,062
    
    
    
    346
    
    
    
    0.81
    %Other Borrowings
    
    
    1,437
    
    
    
    
    
    
    
    
    
    
    
    1,664
    
    
    
    
    
    
    
    Junior Subordinated Debentures
    
    
    82,406
    
    
    
    698
    
    
    
    3.44
    %
    
    
    82,406
    
    
    
    669
    
    
    
    3.29
    %Total Interest-Bearing Liabilities
    
    
    2,133,097
    
    
    
    7,766
    
    
    
    1.48
    %
    
    
    2,360,992
    
    
    
    10,719
    
    
    
    1.84
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    563,191
    
    
    
    
    
    
    
    
    
    
    
    559,100Other Liabilities
    
    
    31,744
    
    
    
    
    
    
    
    
    
    
    
    28,175Total Noninterest-Bearing Liabilities
    
    
    594,935
    
    
    
    
    
    
    
    
    
    
    
    587,275Total Liabilities
    
    
    2,728,032
    
    
    
    
    
    
    
    
    
    
    
    2,948,267Stockholders Equity
    
    
    178,221
    
    
    
    
    
    
    
    
    
    
    
    137,931TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,906,253
    
    
    
    
    
    
    
    
    
    
    $
    3,086,198NET INTEREST INCOME
    
    
    
    
    
    $
    26,130
    
    
    
    
    
    
    
    
    
    
    $
    27,375NET
INTEREST SPREAD(3)
    
    
    
    
    
    
    
    
    
    
    3.27
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %NET
INTEREST MARGIN(4)
    
    
    
    
    
    
    
    
    
    
    3.66
    %
    
    
    
    
    
    
    
    
    
    
    3.69
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs, but excluding the allowance
for loan losses. Non-accrual loans are included in the average loan balance. Loan fees have
been included in the calculation of interest income. Loan fees were $495,000 and $450,000 for
the three months ended March 31, 2011 and 2010, respectively.(2)
    
    Computed on a tax-equivalent basis using an effective marginal rate of 35 percent.(3)
    
    Represents the average rate earned on interest-earning assets less the average rate
paid on interest-bearing liabilities.(4)
    
    Represents annualized net interest income as a percentage of average
interest-earning assets. 38




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##### Table of Contents



Three Months Ended March 31, 2011 vs.Three Months Ended March 31, 2010Increases (Decreases) Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest and Dividend Income:Gross Loans, Net
    
    $
    (7,299
    )
    
    $
    1,509
    
    
    $
    (5,790
    )Municipal Securities:Taxable
    
    
    178
    
    
    
    
    
    
    
    178Tax  Exempt
    
    
    (44
    )
    
    
    (12
    )
    
    
    (56
    )Obligations of Other U.S. Government Agencies
    
    
    620
    
    
    
    (380
    )
    
    
    240Other Debt Securities
    
    
    1,386
    
    
    
    (215
    )
    
    
    1,171Equity Securities
    
    
    (13
    )
    
    
    20
    
    
    
    7Federal Funds Sold
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )Term Federal Funds Sold
    
    
    27
    
    
    
    
    
    
    
    27Interest-Earning Deposits
    
    
    42
    
    
    
    (8
    )
    
    
    34Total Interest and Dividend Income
    
    
    (5,112
    )
    
    
    914
    
    
    
    (4,198
    )Interest Expense:Savings
    
    
    (18
    )
    
    
    (57
    )
    
    
    (75
    )Money Market Checking and NOW Accounts
    
    
    (286
    )
    
    
    (334
    )
    
    
    (620
    )Time Deposits of $100,000 or More
    
    
    588
    
    
    
    (1,206
    )
    
    
    (618
    )Other Time Deposits
    
    
    (913
    )
    
    
    (743
    )
    
    
    (1,656
    )Federal Home Loan Bank Advances
    
    
    (41
    )
    
    
    28
    
    
    
    (13
    )Junior Subordinated Debentures
    
    
    
    
    
    
    29
    
    
    
    29Total Interest Expense
    
    
    (670
    )
    
    
    (2,283
    )
    
    
    (2,953
    )Change in Net Interest Income
    
    $
    (4,442
    )
    
    $
    3,197
    
    
    $
    (1,245
    )
   39




---



##### Table of Contents



Provision for Credit Losses
 Non-Performing Assets Allowance for Loan Losses and
Allowance for Off-Balance Sheet Items
 Non-Interest Income
  Three Months EndedMarch 31,
    
    
    Increase (Decrease)2011
    
    
    2010
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    3,141
    
    
    $
    3,726
    
    
    $
    (585
    )
    
    
    (15.7
    %)Insurance Commissions
    
    
    1,260
    
    
    
    1,278
    
    
    
    (18
    )
    
    
    (1.4
    %)Remittance Fees
    
    
    462
    
    
    
    462
    
    
    
    
    
    
    
    Trade Finance Fees
    
    
    297
    
    
    
    351
    
    
    
    (54
    )
    
    
    (15.4
    %)Other Service Charges and Fees
    
    
    333
    
    
    
    412
    
    
    
    (79
    )
    
    
    (19.2
    %)Bank-Owned Life Insurance Income
    
    
    230
    
    
    
    231
    
    
    
    (1
    )
    
    
    (0.4
    %)Net Gain on Sales of Investment Securities
    
    
    
    
    
    
    105
    
    
    
    (105
    )
    
    
    (100.0
    %)Net Gain (Loss) on Sales of Loans
    
    
    (338
    )
    
    
    
    
    
    
    (338
    )
    
    
    Other Operating Income
    
    
    123
    
    
    
    440
    
    
    
    (317
    )
    
    
    (72.0
    %)Total Non-Interest Income
    
    $
    5,508
    
    
    $
    7,005
    
    
    $
    (1,497
    )
    
    
    (21.4
    %)
  40




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##### Table of Contents



Non-Interest Expense
  Three Months EndedMarch 31,
    
    
    Increase (Decrease)2011
    
    
    2010
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    9,124
    
    
    $
    8,786
    
    
    $
    338
    
    
    
    3.8
    %Occupancy and Equipment
    
    
    2,565
    
    
    
    2,725
    
    
    
    (160
    )
    
    
    (5.9
    %)Deposit Insurance Premiums and Regulatory Assessments
    
    
    2,070
    
    
    
    2,224
    
    
    
    (154
    )
    
    
    (6.9
    %)Data Processing
    
    
    1,399
    
    
    
    1,499
    
    
    
    (100
    )
    
    
    (6.7
    %)Other Real Estate Owned Expense
    
    
    829
    
    
    
    5,700
    
    
    
    (4,871
    )
    
    
    (85.5
    %)Professional Fees
    
    
    789
    
    
    
    1,066
    
    
    
    (277
    )
    
    
    (26.0
    %)Directors and Officers Liability Insurance
    
    
    734
    
    
    
    716
    
    
    
    18
    
    
    
    2.5
    %Supplies and Communications
    
    
    578
    
    
    
    517
    
    
    
    61
    
    
    
    11.8
    %Advertising and Promotion
    
    
    566
    
    
    
    535
    
    
    
    31
    
    
    
    5.8
    %Loan-Related Expense
    
    
    225
    
    
    
    307
    
    
    
    (82
    )
    
    
    (26.7
    %)Amortization of Other Intangible Assets
    
    
    218
    
    
    
    328
    
    
    
    (110
    )
    
    
    (33.5
    %)Other Operating Expenses
    
    
    1,964
    
    
    
    1,821
    
    
    
    143
    
    
    
    7.9
    %Total Non-Interest Expense
    
    $
    21,061
    
    
    $
    26,224
    
    
    $
    (5,163
    )
    
    
    (19.7
    %)
  Provision (Benefit) for Income Taxes
  FINANCIAL CONDITION
 Investment Portfolio
   41




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##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Estimated
    
    
    Unrealized
    
    
    
    
    
    
    Estimated
    
    
    UnrealizedAmortized
    
    
    Fair
    
    
    Gain
    
    
    Amortized
    
    
    Fair
    
    
    GainCost
    
    
    Value
    
    
    (Loss)
    
    
    Cost
    
    
    Value
    
    
    (Loss)(In Thousands)Securities Held to Maturity:Municipal Bonds
    
    $
    697
    
    
    $
    697
    
    
    $
    
    
    
    $
    696
    
    
    $
    696
    
    
    $
    Mortgage-Backed Securities  (1)
    
    
    141
    
    
    
    143
    
    
    
    2
    
    
    
    149
    
    
    
    151
    
    
    
    2Total Securities Held to Maturity
    
    $
    838
    
    
    $
    840
    
    
    $
    2
    
    
    $
    845
    
    
    $
    847
    
    
    $
    2Securities Available for Sale:Collateralized Mortgage Obligations
    
    $
    184,732
    
    
    $
    183,299
    
    
    $
    (1,433
    )
    
    $
    139,053
    
    
    $
    137,193
    
    
    $
    (1,860
    )U.S. Government Agency Securities
    
    
    178,055
    
    
    
    177,068
    
    
    
    (987
    )
    
    
    114,066
    
    
    
    113,334
    
    
    
    (732
    )Mortgage-Backed Securities  (1)
    
    
    124,477
    
    
    
    125,761
    
    
    
    1,284
    
    
    
    108,436
    
    
    
    109,842
    
    
    
    1,460Municipal Bonds
    
    
    22,366
    
    
    
    21,036
    
    
    
    (1,330
    )
    
    
    22,420
    
    
    
    21,028
    
    
    
    (1,392
    )Corporate Bonds
    
    
    20,452
    
    
    
    20,114
    
    
    
    (338
    )
    
    
    20,449
    
    
    
    20,205
    
    
    
    (244
    )Asset-Backed Securities
    
    
    6,651
    
    
    
    6,882
    
    
    
    231
    
    
    
    7,115
    
    
    
    7,384
    
    
    
    269Other Securities
    
    
    3,305
    
    
    
    3,243
    
    
    
    (62
    )
    
    
    3,305
    
    
    
    3,259
    
    
    
    (46
    )Equity Securities  (2)
    
    
    647
    
    
    
    953
    
    
    
    306
    
    
    
    647
    
    
    
    873
    
    
    
    226Total Securities Available for Sale
    
    $
    540,685
    
    
    $
    538,356
    
    
    $
    (2,329
    )
    
    $
    415,491
    
    
    $
    413,118
    
    
    $
    (2,373
    )
 
 (1)
    
    Collateralized by residential mortgages and guaranteed by U.S. government sponsored
entities.(2)
    
    Balances presented for amortized cost, representing two corporate bonds, were
net of an OTTI charge of $790,000, which was related to a credit loss, as of December 31,
2010. We recorded an OTTI charge of $790,000 to write down the value of one investment
security to its fair value during the year ended December 31, 2010.  Available for Sale
    
    
    Held to MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)Within One Year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Over One Year Through Five Years
    
    
    178,438
    
    
    
    177,230
    
    
    
    697
    
    
    
    697Over Five Years Through Ten Years
    
    
    32,440
    
    
    
    32,238
    
    
    
    
    
    
    
    Over Ten Years
    
    
    19,951
    
    
    
    18,875
    
    
    
    
    
    
    
    Collateralized Mortgage Obligations
    
    
    184,732
    
    
    
    183,299
    
    
    
    
    
    
    
    Mortgage-Backed Securities
    
    
    124,477
    
    
    
    125,761
    
    
    
    141
    
    
    
    143Equity Securities
    
    
    647
    
    
    
    953
    
    
    
    
    
    
    
    $
    540,685
    
    
    $
    538,356
    
    
    $
    838
    
    
    $
    840
 42




---



##### Table of Contents



Holding PeriodLess than 12 Months
    
    
    12 Months or More
    
    
    TotalGross
    
    
    Estimated
    
    
    Number
    
    
    Gross
    
    
    Estimated
    
    
    Number
    
    
    Gross
    
    
    Estimated
    
    
    NumberUnrealized
    
    
    Fair
    
    
    of
    
    
    Unrealized
    
    
    Fair
    
    
    of
    
    
    Unrealized
    
    
    Fair
    
    
    ofInvestment Securities
    
    Losses
    
    
    Value
    
    
    Securities
    
    
    Losses
    
    
    Value
    
    
    Securities
    
    
    Losses
    
    
    Value
    
    
    SecuritiesAvailable for Sale
    
    (In Thousands)March 31, 2011:Mortgage-Backed Securities
    
    $
    730
    
    
    $
    73,164
    
    
    
    21
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    730
    
    
    $
    73,164
    
    
    
    21Collateralized Mortgage
Obligations
    
    
    1,936
    
    
    
    127,190
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,936
    
    
    
    127,190
    
    
    
    27Municipal Bonds
    
    
    1,379
    
    
    
    17,914
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,379
    
    
    
    17,914
    
    
    
    12U.S. Government Agency
Securities
    
    
    1,054
    
    
    
    131,016
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,054
    
    
    
    131,016
    
    
    
    35Other Securities
    
    
    11
    
    
    
    1,989
    
    
    
    2
    
    
    
    52
    
    
    
    948
    
    
    
    1
    
    
    
    63
    
    
    
    2,937
    
    
    
    3Corporate Bonds
    
    
    348
    
    
    
    17,120
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    348
    
    
    
    17,120
    
    
    
    5$
    5,458
    
    
    $
    368,393
    
    
    
    102
    
    
    $
    52
    
    
    $
    948
    
    
    
    1
    
    
    $
    5,510
    
    
    $
    369,341
    
    
    
    103December 31, 2010:Mortgage-Backed Securities
    
    $
    731
    
    
    $
    62,738
    
    
    
    16
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    731
    
    
    $
    62,738
    
    
    
    16Collateralized Mortgage
Obligations
    
    
    2,330
    
    
    
    99,993
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,330
    
    
    
    99,993
    
    
    
    20Municipal Bonds
    
    
    1,440
    
    
    
    16,907
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,440
    
    
    
    16,907
    
    
    
    11U.S. Government Agency
Securities
    
    
    830
    
    
    
    69,266
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    830
    
    
    
    69,266
    
    
    
    14Other Securities
    
    
    3
    
    
    
    1,997
    
    
    
    2
    
    
    
    43
    
    
    
    957
    
    
    
    1
    
    
    
    46
    
    
    
    2,954
    
    
    
    3Corporate Bonds
    
    
    257
    
    
    
    17,210
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257
    
    
    
    17,210
    
    
    
    5$
    5,591
    
    
    $
    268,111
    
    
    
    68
    
    
    $
    43
    
    
    $
    957
    
    
    
    1
    
    
    $
    5,634
    
    
    $
    269,068
    
    
    
    69
     43




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##### Table of Contents



Loan Portfolio
  March 31,
    
    
    December 31,
    
    
    Increase (Decrease)2011
    
    
    2010
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Real Estate Loans:Commercial Property (1)
    
    $
    698,869
    
    
    $
    731,482
    
    
    $
    (32,613
    )
    
    
    (4.5
    %)Construction (2)
    
    
    56,707
    
    
    
    62,400
    
    
    
    (5,693
    )
    
    
    (9.1
    %)Residential Property
    
    
    60,352
    
    
    
    62,645
    
    
    
    (2,293
    )
    
    
    (3.7
    %)Total Real Estate Loans
    
    
    815,928
    
    
    
    856,527
    
    
    
    (40,599
    )
    
    
    (4.7
    %)Commercial and Industrial Loans:  (3)Commercial Term (4)
    
    
    1,083,294
    
    
    
    1,133,892
    
    
    
    (50,598
    )
    
    
    (4.5
    %)Commercial Lines of Credit
    
    
    59,318
    
    
    
    59,056
    
    
    
    262
    
    
    
    0.4
    %SBA (5)
    
    
    120,172
    
    
    
    123,750
    
    
    
    (3,578
    )
    
    
    (2.9
    %)International
    
    
    46,860
    
    
    
    44,167
    
    
    
    2,693
    
    
    
    6.1
    %Total Commercial and Industrial Loans
    
    
    1,309,644
    
    
    
    1,360,865
    
    
    
    (51,221
    )
    
    
    (3.8
    %)Consumer Loans
    
    
    48,120
    
    
    
    50,300
    
    
    
    (2,180
    )
    
    
    (4.3
    %)Total Loans  Gross
    
    
    2,173,692
    
    
    
    2,267,692
    
    
    
    (94,000
    )
    
    
    (4.1
    %)Deferred Loan Fees
    
    
    (277
    )
    
    
    (566
    )
    
    
    289
    
    
    
    (51.1
    %)Allowance for Loan Losses
    
    
    (125,780
    )
    
    
    (146,059
    )
    
    
    20,279
    
    
    
    (13.9
    %)Net Loans Receivable
    
    $
    2,047,635
    
    
    $
    2,121,067
    
    
    $
    (73,432
    )
    
    
    (3.5
    %)
 
 (1)
    
    Includes loans held for sale, at the lower of cost or fair value, of $3.5
million and $2.3 million as of March 31, 2011 and December 31, 2010, respectively.(2)
    
    Includes loans held for sale, at the lower of cost or fair value, of $0 and
$1.4 million as of March 31, 2011 and December 31, 2010, respectively.(3)
    
    Includes owner-occupied property loans of $864.7 million and $894.8 million
as of March 31, 2011 and December 31, 2010, respectively.(4)
    
    Includes loans held for sale, at the lower of cost or fair value, of $25.0
million and $14.9 million as of March 31, 2011 and December 31, 2010, respectively.(5)
    
    Includes loans held for sale, at the lower of cost or fair value, of $19.1
million and $18.1 million as of March 31, 2011 and December 31, 2010, respectively.   44




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##### Table of Contents



Balance as of
    
    
    Percentage of TotalIndustry
    
    March 31, 2011
    
    
    Gross Loans Outstanding(In Thousands)Lessors of Non-Residential Buildings
    
    $
    378,387
    
    
    
    17.4
    %Accommodation/Hospitality
    
    $
    304,379
    
    
    
    14.0
    %Gasoline Stations
    
    $
    281,569
    
    
    
    13.0
    %
  Non-Performing Assets
    45




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##### Table of Contents



March 31,
    
    
    December 31,
    
    
    Increase (Decrease)2011
    
    
    2010
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Non-Performing Loans:Non-Accrual Loans:Real Estate Loans:Commercial Property
    
    $
    36,300
    
    
    $
    47,937
    
    
    $
    (11,637
    )
    
    
    (24.3
    %)Construction
    
    
    23,421
    
    
    
    19,097
    
    
    
    4,324
    
    
    
    22.6
    %Residential Property
    
    
    2,014
    
    
    
    1,925
    
    
    
    89
    
    
    
    4.6
    %Commercial and Industrial Loans:Commercial Term
    
    
    56,198
    
    
    
    63,012
    
    
    
    (6,814
    )
    
    
    (10.8
    %)Commercial Lines of Credit
    
    
    2,169
    
    
    
    2,798
    
    
    
    (629
    )
    
    
    (22.5
    %)SBA
    
    
    30,539
    
    
    
    33,085
    
    
    
    (2,546
    )
    
    
    (7.7
    %)International
    
    
    123
    
    
    
    127
    
    
    
    (4
    )
    
    
    (3.1
    %)Consumer Loans
    
    
    966
    
    
    
    1,047
    
    
    
    (81
    )
    
    
    (7.7
    %)Total Non-Accrual Loans
    
    
    151,730
    
    
    
    169,028
    
    
    
    (17,298
    )
    
    
    (10.2
    %)Loans 90 Days or More Past Due and Still Accruing
(as to Principal or Interest):
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Non-Performing Loans (1) (2)
    
    
    151,730
    
    
    
    169,028
    
    
    
    (17,298
    )
    
    
    (10.2
    %)Other Real Estate Owned
    
    
    2,642
    
    
    
    4,089
    
    
    
    (1,447
    )
    
    
    (35.4
    %)Total Non-Performing Assets
    
    $
    154,372
    
    
    $
    173,117
    
    
    $
    (18,745
    )
    
    
    (10.8
    %)Non-Performing Loans as a Percentage of Total Gross
Loans
    
    
    6.98
    %
    
    
    7.45
    %Non-Performing Assets as a Percentage of Total Assets
    
    
    5.36
    %
    
    
    5.95
    %Troubled Debt Restructured Performing Loans
    
    $
    43,311
    
    
    $
    47,395
    
    
    $
    (4,084
    )
    
    
    (8.6
    %)
 
 (1)
    
    Includes troubled debt restructured non-performing loans
of $34.2 million and $27.0 million as of March 31,
2011 and December 31, 2010, respectively.(2)
    
    Includes loans held for sale.     46




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##### Table of Contents



InterestIncomeWith No
    
    
    
    
    
    
    
    
    
    
    
    
    
    RecognizedUnpaid
    
    
    Related
    
    
    With an
    
    
    
    
    
    
    Average
    
    
    for the ThreeRecorded
    
    
    Principal
    
    
    Allowance
    
    
    Allowance
    
    
    Related
    
    
    Recorded
    
    
    MonthsInvestment
    
    
    Balance
    
    
    Recorded
    
    

    Recorded
    
    
    Allowance
    
    
    Investment
    
    
    Ended(1)(In Thousands)March 31, 2011:Real Estate Loans:Commercial PropertyRetail
    
    $
    16,757
    
    
    $
    17,134
    
    
    $
    7,204
    
    
    $
    9,553
    
    
    $
    1,881
    
    
    $
    17,016
    
    
    $
    174Land
    
    
    27,515
    
    
    
    27,515
    
    
    
    22,523
    
    
    
    4,992
    
    
    
    1,602
    
    
    
    29,655
    
    
    
    Other
    
    
    5,448
    
    
    
    5,578
    
    
    
    3,470
    
    
    
    1,978
    
    
    
    138
    
    
    
    5,383
    
    
    
    28Construction
    
    
    23,421
    
    
    
    23,643
    
    
    
    14,264
    
    
    
    9,157
    
    
    
    195
    
    
    
    23,536
    
    
    
    76Residential Property
    
    
    2,014
    
    
    
    2,091
    
    
    
    1,651
    
    
    
    362
    
    
    
    39
    
    
    
    2,068
    
    
    
    10Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    12,785
    
    
    
    13,339
    
    
    
    2,149
    
    
    
    10,636
    
    
    
    9,057
    
    
    
    13,229
    
    
    
    145Secured by Real Estate
    
    
    82,068
    
    
    
    83,757
    
    
    
    26,833
    
    
    
    55,235
    
    
    
    15,853
    
    
    
    83,745
    
    
    
    1,136Commercial Lines of Credit
    
    
    3,428
    
    
    
    3,483
    
    
    
    1,549
    
    
    
    1,879
    
    
    
    826
    
    
    
    3,469
    
    
    
    23SBA
    
    
    18,038
    
    
    
    19,503
    
    
    
    9,176
    
    
    
    8,862
    
    
    
    1,740
    
    
    
    18,712
    
    
    
    290International
    
    
    123
    
    
    
    139
    
    
    
    
    
    
    
    124
    
    
    
    123
    
    
    
    135
    
    
    
    2Consumer Loans
    
    
    903
    
    
    
    921
    
    
    
    654
    
    
    
    249
    
    
    
    81
    
    
    
    915
    
    
    
    10Total
    
    $
    192,500
    
    
    $
    197,103
    
    
    $
    89,473
    
    
    $
    103,027
    
    
    $
    31,535
    
    
    $
    197,863
    
    
    $
    1,894December 31, 2010:Real Estate Loans:Commercial PropertyRetail
    
    $
    17,606
    
    
    $
    18,050
    
    
    $
    6,336
    
    
    $
    11,270
    
    
    $
    1,543
    
    
    $
    21,190
    
    
    $
    30Land
    
    
    35,207
    
    
    
    35,295
    
    
    
    5,482
    
    
    
    29,725
    
    
    
    1,485
    
    
    
    40,858
    
    
    
    Other
    
    
    11,357
    
    
    
    11,476
    
    
    
    10,210
    
    
    
    1,147
    
    
    
    33
    
    
    
    15,342
    
    
    
    42Construction
    
    
    17,691
    
    
    
    17,831
    
    
    
    13,992
    
    
    
    3,699
    
    
    
    280
    
    
    
    12,311
    
    
    
    Residential Property
    
    
    1,926
    
    
    
    1,990
    
    
    
    1,926
    
    
    
    
    
    
    
    
    
    
    
    2,383
    
    
    
    19Commercial and Industrial Loans:Commercial TermUnsecured
    
    
    17,847
    
    
    
    18,799
    
    
    
    6,465
    
    
    
    11,382
    
    
    
    10,313
    
    
    
    18,460
    
    
    
    198Secured by Real Estate
    
    
    80,213
    
    
    
    81,395
    
    
    
    35,154
    
    
    
    45,059
    
    
    
    11,831
    
    
    
    101,617
    
    
    
    318Commercial Lines of Credit
    
    
    4,067
    
    
    
    4,116
    
    
    
    1,422
    
    
    
    2,645
    
    
    
    1,321
    
    
    
    4,988
    
    
    
    15SBA
    
    
    17,715
    
    
    
    18,544
    
    
    
    7,112
    
    
    
    10,603
    
    
    
    2,122
    
    
    
    23,213
    
    
    
    301International
    
    
    127
    
    
    
    141
    
    
    
    
    
    
    
    127
    
    
    
    127
    
    
    
    397
    
    
    
    3Consumer Loans
    
    
    934
    
    
    
    951
    
    
    
    393
    
    
    
    541
    
    
    
    393
    
    
    
    639
    
    
    
    6Total
    
    $
    204,690
    
    
    $
    208,588
    
    
    $
    88,492
    
    
    $
    116,198
    
    
    $
    29,448
    
    
    $
    241,398
    
    
    $
    932
 
 (1)
    
    Represents interest income recognized on impaired loans subsequent to classification
as impaired. 47




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##### Table of Contents



Three Months Ended March 31,2011
    
    
    2010(In Thousands)Interest Income That Would Have Been Recognized Had Impaired
Loans Performed in Accordance With Their Original Terms
    
    $
    4,429
    
    
    $
    5,569Less: Interest Income Recognized on Impaired Loans
    
    
    (2,485
    )
    
    
    (2,771
    )Interest Foregone on Impaired Loans
    
    $
    1,944
    
    
    $
    2,798
  Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
      48




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49




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##### Table of Contents




    
    changes in lending policies and procedures, including underwriting standards and
collection, charge-offs,
and recovery practice;
    
    changes in national and local economic and business conditions and developments,
including the condition
of various market segments;
    
    changes in the nature and volume of the portfolio;
    
    changes in the trend of the volume and severity of past due and classified loans,
and trends in the volume
of non-accrual loans, troubled debt restructurings, charge-offs and other loan
modifications;
    
    changes in the quality of the Banks loan review system and the degree of oversight
by the Board of
Directors;
    
    the existence and effect of any concentrations of credit, and changes in the level
of such concentrations;
    
    transfer risk on cross-border lending activities; and
    
    the effect of external factors such as competition and legal and regulatory
requirements as well as
declining collateral values on the level of estimated credit losses in the Banks current
portfolio.
   March 31, 2011
    
    
    December 31, 2010Allowance
    
    
    Loans
    
    
    Allowance
    
    
    LoansAllowance for Loan Losses Applicable To
    
    Amount
    
    
    Receivable
    
    
    Amount
    
    
    Receivable(Dollars in Thousands)Real Estate Loans:Commercial Property (1)
    
    $
    21,693
    
    
    $
    695,357
    
    
    $
    26,248
    
    
    $
    729,222Construction
    
    
    3,454
    
    
    
    56,707
    
    
    
    5,606
    
    
    
    60,995Residential Property
    
    
    737
    
    
    
    60,352
    
    
    
    911
    
    
    
    62,645Total Real Estate Loans
    
    
    25,884
    
    
    
    812,416
    
    
    
    32,765
    
    
    
    852,862Commercial and Industrial Loans: (1)
    
    
    93,878
    
    
    
    1,265,507
    
    
    
    108,986
    
    
    
    1,327,920Consumer Loans
    
    
    1,732
    
    
    
    48,120
    
    
    
    2,077
    
    
    
    50,300Unallocated
    
    
    4,286
    
    
    
    
    
    
    
    2,231
    
    
    
    Total
    
    $
    125,780
    
    
    $
    2,126,043
    
    
    $
    146,059
    
    
    $
    2,231,072
 
 (1)
    
    Excludes Loans held for sale. 50




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##### Table of Contents



As of and for the Three Months EndedMarch 31,
    
    
    December 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2010(Dollars in Thousands)Allowance for Loan Losses:Balance at Beginning of Period
    
    $
    146,059
    
    
    $
    176,063
    
    
    $
    144,996Actual Charge-Offs
    
    
    (25,181
    )
    
    
    (37,787
    )
    
    
    (30,114
    )Recoveries on Loans Previously Charged Off
    
    
    3,626
    
    
    
    2,538
    
    
    
    3,721Net Loan Charge-Offs
    
    
    (21,555
    )
    
    
    (35,249
    )
    
    
    (26,393
    )Provision Charged to Operating Expenses
    
    
    1,276
    
    
    
    5,245
    
    
    
    59,217Balance at End of Period
    
    $
    125,780
    
    
    $
    146,059
    
    
    $
    177,820Allowance for Off-Balance Sheet Items:Balance at Beginning of Period
    
    $
    3,417
    
    
    $
    3,662
    
    
    $
    3,876Provision Charged to Operating Expenses
    
    
    (1,276
    )
    
    
    (245
    )
    
    
    (1,221
    )Balance at End of Period
    
    $
    2,141
    
    
    $
    3,417
    
    
    $
    2,655Ratios:Net Loan Charge-Offs to Average Total Gross Loans (1)
    
    
    3.91
    %
    
    
    5.95
    %
    
    
    3.87
    %Net Loan Charge-Offs to Total Gross Loans (1)
    
    
    4.02
    %
    
    
    6.17
    %
    
    
    3.99
    %Allowance for Loan Losses to Average Total Gross Loans
    
    
    5.63
    %
    
    
    6.21
    %
    
    
    6.43
    %Allowance for Loan Losses to Total Gross Loans
    
    
    5.79
    %
    
    
    6.44
    %
    
    
    6.63
    %Net Loan Charge-Offs to Allowance for Loan Losses (1)
    
    
    69.50
    %
    
    
    95.75
    %
    
    
    60.20
    %Net Loan Charge-Offs to Provision Charged to Operating Expenses
    
    
    1,689.26
    %
    
    
    672.05
    %
    
    
    44.57
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    82.90
    %
    
    
    86.41
    %
    
    
    67.81
    %Balances:Average Total Gross Loans Outstanding During Period
    
    $
    2,234,570
    
    
    $
    2,350,425
    
    
    $
    2,766,965Total Gross Loans Outstanding at End of Period
    
    $
    2,173,692
    
    
    $
    2,267,692
    
    
    $
    2,683,853Non-Performing Loans at End of Period
    
    $
    151,730
    
    
    $
    169,028
    
    
    $
    262,232
 
 (1)
    
    Net loan charge-offs are annualized to calculate the ratios.    51




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##### Table of Contents



For the Three Months EndedMarch 31,
    
    
    December 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2010(Dollars in Thousands)Charge-offs:Real Estate Loans
    
    $
    7,053
    
    
    $
    10,847
    
    
    $
    5,404Commercial Term Loans
    
    
    14,348
    
    
    
    22,435
    
    
    
    20,855SBA Loans
    
    
    3,154
    
    
    
    3,593
    
    
    
    2,980Commercial Lines of Credit
    
    
    451
    
    
    
    427
    
    
    
    251International Loans
    
    
    
    
    
    
    410
    
    
    
    Consumer Loans
    
    
    175
    
    
    
    75
    
    
    
    624Total Charge-offs
    
    $
    25,181
    
    
    $
    37,787
    
    
    $
    30,114Recoveries:Real Estate Loans
    
    $
    521
    
    
    $
    98
    
    
    $
    1,703Commercial Term Loans
    
    
    2,928
    
    
    
    1,823
    
    
    
    1,581SBA Loans
    
    
    110
    
    
    
    215
    
    
    
    351Commercial Lines of Credit
    
    
    52
    
    
    
    20
    
    
    
    44International Loans
    
    
    6
    
    
    
    364
    
    
    
    1Consumer Loans
    
    
    9
    
    
    
    18
    
    
    
    41Total Recoveries
    
    $
    3,626
    
    
    $
    2,538
    
    
    $
    3,721Net Charge-offs
    
    $
    21,555
    
    
    $
    35,249
    
    
    $
    26,393
   Deposits
  March 31,
    
    
    December 31,
    
    
    Increase (Decrease)2011
    
    
    2010
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Demand  Noninterest-Bearing
    
    $
    576,733
    
    
    $
    546,815
    
    
    $
    29,918
    
    
    
    5.5
    %Interest-Bearing:Savings
    
    
    113,513
    
    
    
    113,968
    
    
    
    (455
    )
    
    
    (0.4
    %)Money Market Checking and NOW Accounts
    
    
    469,377
    
    
    
    402,481
    
    
    
    66,896
    
    
    
    16.6
    %Time Deposits of $100,000 or More
    
    
    977,738
    
    
    
    1,118,621
    
    
    
    (140,883
    )
    
    
    (12.6
    %)Other Time Deposits
    
    
    293,579
    
    
    
    284,836
    
    
    
    8,743
    
    
    
    3.1
    %Total Deposits
    
    $
    2,430,940
    
    
    $
    2,466,721
    
    
    $
    (35,781
    )
    
    
    (1.5
    %)
  52




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##### Table of Contents



Federal Home Loan Bank Advances and Other Borrowings
  Junior Subordinated Debentures
  53




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##### Table of Contents



INTEREST RATE RISK MANAGEMENT
   AfterThree
    
    
    After OneMonths
    
    
    Year ButWithin
    
    
    But
    
    
    Within
    
    
    After
    
    
    Non-Three
    
    
    Within
    
    
    Five
    
    
    Five
    
    
    Interest-Months
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Sensitive
    
    
    Total(Dollars in Thousands)ASSETSCash and Due From Banks
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    67,507
    
    
    $
    67,507Interest-Bearing Deposits in Other Banks
    
    
    101,618
    
    
    
    1,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,854Investment Securities:Fixed Rate
    
    
    12,499
    
    
    
    39,274
    
    
    
    237,875
    
    
    
    143,021
    
    
    
    4,876
    
    
    
    437,545Floating Rate
    
    
    8,787
    
    
    
    51,012
    
    
    
    36,022
    
    
    
    6,333
    
    
    
    (505
    )
    
    
    101,649Loans:Fixed Rate
    
    
    109,890
    
    
    
    172,039
    
    
    
    404,814
    
    
    
    10,123
    
    
    
    
    
    
    
    696,866Floating Rate
    
    
    1,250,062
    
    
    
    46,781
    
    
    
    29,674
    
    
    
    1,257
    
    
    
    
    
    
    
    1,327,774Non-Accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151,730
    
    
    
    151,730Deferred Loan Fees, Discounts, and
Allowance for Loan Losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128,735
    )
    
    
    (128,735
    )Investment in Federal Home Loan Bank Stock
and Federal
Reserve Bank Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,649
    
    
    
    
    
    
    
    33,649Other Assets
    
    
    
    
    
    
    27,581
    
    
    
    
    
    
    
    6,376
    
    
    
    54,870
    
    
    
    88,827Total Assets
    
    $
    1,482,856
    
    
    $
    337,923
    
    
    $
    708,385
    
    
    $
    200,759
    
    
    $
    149,743
    
    
    $
    2,879,666LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits:Demand  Noninterest-Bearing
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    576,733
    
    
    $
    576,733Savings
    
    
    11,238
    
    
    
    26,971
    
    
    
    54,997
    
    
    
    20,307
    
    
    
    
    
    
    
    113,513Money Market Checking and NOW Accounts
    
    
    34,062
    
    
    
    162,347
    
    
    
    208,878
    
    
    
    64,090
    
    
    
    
    
    
    
    469,377Time Deposits:Fixed Rate
    
    
    214,004
    
    
    
    664,523
    
    
    
    392,734
    
    
    
    
    
    
    
    
    
    
    
    1,271,259Floating Rate
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    56Federal Home Loan Bank Advances
    
    
    150,060
    
    
    
    273
    
    
    
    3,232
    
    
    
    
    
    
    
    
    
    
    
    153,565Other Borrowings
    
    
    1,386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,386Junior Subordinated Debentures
    
    
    82,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,406Other Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,318
    
    
    
    27,318Stockholders Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184,051
    
    
    
    184,051Total Liabilities and Stockholders Equity
    
    $
    493,156
    
    
    $
    854,114
    
    
    $
    659,895
    
    
    $
    84,399
    
    
    $
    788,102
    
    
    $
    2,879,666Repricing Gap
    
    $
    989,700
    
    
    $
    (516,191
    )
    
    $
    48,488
    
    
    $
    116,362
    
    
    $
    (638,359
    )
    
    $
    Cumulative Repricing Gap
    
    $
    989,700
    
    
    $
    473,509
    
    
    $
    521,997
    
    
    $
    638,359
    
    
    $
    
    
    
    $
    Cumulative Repricing Gap as a Percentage of
Total Assets
    
    
    34.37
    %
    
    
    16.44
    %
    
    
    18.13
    %
    
    
    22.17
    %
    
    
    Cumulative Repricing Gap as a Percentage of
Interest-Earning Assets
    
    
    36.65
    %
    
    
    17.54
    %
    
    
    19.33
    %
    
    
    23.64
    %
    
    
    
  54




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##### Table of Contents



Less Than Three Months
    
    Less Than Twelve MonthsMarch 31,
    
    December 31,
    
    March 31,
    
    December 31,2011
    
    2010
    
    2011
    
    2010(Dollars in Thousands)Cumulative Repricing Gap
    
    $
    989,700
    
    
    $
    921,942
    
    
    $
    473,509
    
    
    $
    855,812Cumulative Repricing Gap as a Percentage of Total Assets
    
    
    34.37
    %
    
    
    31.71
    %
    
    
    16.44
    %
    
    
    29.44
    %Cumulative Repricing Gap as a Percentage of Interest-Earning Assets
    
    
    36.65
    %
    
    
    33.67
    %
    
    
    17.54
    %
    
    
    31.25
    %
   Rate Shock TablePercentage Changes
    
    Change in AmountChange in
    
    Net
    
    Economic
    
    Net
    
    EconomicInterest
    
    Interest
    
    Value of
    
    Interest
    
    Value ofRate
    
    Income
    
    Equity
    
    Income
    
    Equity(Dollars in Thousands)200%
    
    
    7.82
    %
    
    
    (10.49
    )%
    
    $
    8,723
    
    
    $
    (33,677
    )100%
    
    
    3.22
    %
    
    
    (5.46
    )%
    
    $
    3,596
    
    
    $
    (17,525
    )(100%)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )(200%)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
 
 (1)
    
    The table above only reflects the impact of upward shocks due to the
fact that a downward parallel shock of 100 basis points or more is not possible given that
some short-term rates are currently less than one percent.  55




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##### Table of Contents



CAPITAL RESOURCES AND LIQUIDITY
 Capital Resources
   Ratio of Tangible ShareholdersDate
    
    Equity to Total Tangible AssetsFrom December 31, 2010 and Until the Order is Terminated
    
    Not Less Than 9.5 Percent
     Liquidity  Hanmi Financial
  56




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##### Table of Contents



Liquidity  Hanmi Bank
       OFF-BALANCE SHEET ARRANGEMENTS
 Note 10  Off-Balance Sheet
Commitments Item 1.
Business  Off-Balance Sheet Commitments
 CONTRACTUAL OBLIGATIONS
  57




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##### Table of Contents



RECENTLY ISSUED ACCOUNTING STANDARDS
 FASB ASU 2011-02, Receivable (Topic 310), Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
 FASB ASU 2011-01, Receivable (Topic 310), Deferral of the Effective Date of Disclosure about
Troubled Debt Restructurings in Update No. 2010-20
 FASB ASU 2010-20, Receivable (Topic 310), Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
 FASB ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820)
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Interest Rate Risk Management  Capital Resources and Liquidity.
 
 ITEM 4. CONTROLS AND PROCEDURES
   58




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
  59




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Document31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 60




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##### Table of Contents



SIGNATURES
  HANMI FINANCIAL CORPORATIONDate: May 9, 2011
    
    By:
    
    /s/ Jay S. Yoo

Jay S. YooPresident and Chief Executive OfficerBy:
    
    /s/ Brian E. Cho

Brian E. ChoExecutive Vice President and Chief Financial Officer
 61